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In microeconomics, the Bertrand–Edgeworth model of price-setting oligopoly looks at what happens when there is a homogeneous product (i.e. consumers want to buy from the cheapest seller) where there is a limit to the output of firms which are willing and able to sell at a particular price. This differs from the Bertrand competition model ...
Strategic trade theory (sometimes appearing in literature as "strategic trade policy") describes the policy certain countries adopt in order to affect the outcome of strategic interactions between firms in an international oligopoly, an industry dominated by a small number of firms. [1]
The Cournot model and Bertrand model are the most well-known models in oligopoly theory, and have been studied and reviewed by numerous economists. [54] The Cournot-Bertrand model is a hybrid of these two models and was first developed by Bylka and Komar in 1976. [55] This model allows the market to be split into two groups of firms.
An oligopoly is a market structure in which a market or industry is dominated by a small number of firms (oligopolists). Oligopolies can create the incentive for firms to engage in collusion and form cartels that reduce competition leading to higher prices for consumers and less overall market output. [ 32 ]
In this market structure, each firm could only choose whole amounts and each firm receives zero payoffs when the aggregate demand exceeds the size of the amount that they share with each other. The market demand function is () =. The Bertrand model has similar assumptions to the Cournot model: Two firms
When comparing the models, the oligopoly theory suggest that the Bertrand industries are more competitive than Cournot industries. This is because quantities in the Cournot model are considered as strategic substitutes ; that is, the increase in quantity level produced by a firm is accommodated by the rival, producing less.
An extensive-form representation is often used to analyze the Stackelberg leader-follower model. Also referred to as a “decision tree”, the model shows the combination of outputs and payoffs both firms have in the Stackelberg game. A Stackelberg game represented in extensive form. The image on the left depicts in extensive form a ...
In an oligopoly market structure, the market is supplied by a small number of firms (more than 2). Moreover, there are so few firms that the actions of one firm can influence the actions of the other firms.