Oligopoly

Question 1

Oligopoly + provide an example?

Answer 1

A small group of firms that can influence each other, e.g. video game producers like Sony and Ubisoft

Question 2

What distinguishes an oligopoly market from a monopoly market?

Answer 2

Oli. has few firms, mono. has one
Oli. shares MP, mono. has high MP
Oli. has limited entry, mono. has no entry into the market

Question 3

What are the 3 different models of oligopolies + assumptions?

Answer 3

Cournot: assumes firms choose their Qs based on the Qs of their competitors, assuming rivals’ Qs remain constant

Bertrand: assumes firms engage in price competition until they reach competitive EQ where P = MC (assumes homogenous products and consumers will switch to lower-priced products)

Stackelberg: Assumes firms make sequential decisions, with one firm acting as the leader and other firms acting as followers (predicts leader firm has CA due to first-mover advantage)

Question 4

Key formulas you need to deduce algebra of duopolies?

Answer 4

AC = ci + fi/qi
Q = (q1+q2)
P = a - bQ