For a duopoly involving homogeneous products, explain and contrast a Cournot, Stackelberg and Bertrand equilibrium.

The critical problem faced by a affluent in an oligopoly is that its decisions affect the legal injurys and quantities of its rivals. The oligopoly problem arises because, where in that compliance are each(prenominal) a few suppliers to the market; the contain on for the product of one(a) securely depends signifi washstandtly on the price and outturn. A non-cooperative duopoly is an patience consisting of two starchys in which devoteds take their decisions independently and can be classified according to whether firms treat standard or price as the key strategic variable. When it comes to quantity pose there are two major models put forward. The first, highly-developed by Cournot in 1838 is based on firms setting quantities synchronally where respectively firm is setting the payoff that maximises its profit condition the output of its rival. In 1934 Stackelberg argued that one firm takes the role of leader with the other firm acting as a follower emphasising the quantity leadership view. bequest the leader anticipates the response of the follower and uses this to its own advantage. Bertrand in 1883 argued that price, not output, should be the firms decision variable where rivalry between the duopolists would leg in both(prenominal) setting a zero price.

all(prenominal) of the models provides a diametric equilibrium output and welfare level We withdraw a linear market demand curve, P(Q) which is given by a - Q where a is a positive parameter. Further we gain that all firms would incur the same constant per unit drudgery cost, c, where c The Cournot model puts for ward a case for simultaneous quantity settin! g where at the beginning of each end the firms take their decision independently and simultaneously. Here the profits of firm f (same as TR) will depend on both outputs which is given by ?1 = q1(a - q1 - q2). If you want to get a wide essay, order it on our website: BestEssayCheap.com

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