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Double marginalization is a vertical externality that occurs when two firms with market power (i.e., not in a situation of perfect competition), at different vertical levels in the same supply chain, apply a mark-up to their prices. [1]
Organizational slack occurs when firms opt to employ more resources than are needed to produce a given level of output. Unused capacity results in X-inefficiency. Organizational slack can be explained by the principal-agent problem. In companies ownership and management are separate.
Proper capital management is important to the financial health of a firm, with efficient resource allocation through capital management, firms can improve its cash flow and profitability. Capital management involves tracking various ratios within the firm, most important ones include: [92] Capital ratio; Inventory turnover ratio; Collection ratio
A special type of Oligopoly, where two firms have exclusive power and control in a market. Both companies produce the same type of product and no other company produces the same or alternative product. The goods produced are circulated in only one market, and no other company intends to enter the market.
There is more than one firm and all firms produce a homogeneous product, i.e., there is no product differentiation; Firms do not cooperate, i.e., there is no collusion; Firms have market power, i.e., each firm's output decision affects the good's price; The number of firms is fixed; Firms compete in quantities rather than prices; and
For instance, taking the first definition, if it costs a firm $400 to produce 5 units and $480 to produce 6, the marginal cost of the sixth unit is 80 dollars. Conversely, the marginal income from the production of 6 units is the income from the production of 6 units minus the income from the production of 5 units (the latter item minus the ...
In this model, two companies, each of which chooses its own quantity of output, compete against each other while facing constant marginal and average costs. [3] The market price is determined by the sum of the output of two companies. () = is the equation for the market demand function. [4] Market with two firms i = 1, 2 with constant marginal ...
Suppose there are two firms, we use C for the marginal cost, C1 stands for the marginal cost of firm 1 and C2 stands for the marginal cost of firm 2. From the result, there are two cases: When C1 < C2, Firm 1 can set the price between C1 and C2. C1 = C2 = C; This is the case of the basic Bertrand Competition which both firms have the same ...