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Example: Agricultural products which have many buyers and sellers, selling homogeneous goods where the price is determined by the demand and supply of the market and not individual firms. In the short run, a firm in a perfectly competitive market may gain profits or loss, but in the long run, due to the entry and exit of new firms, price will ...
Bertrand's model assumes that firms are selling homogeneous products and therefore have the same marginal production costs, and firms will focus on competing in prices simultaneously. After competing in prices for a while, firms would eventually reach an equilibrium where prices would be the same as marginal costs of production.
Homogeneous products: The products are perfect substitutes for each other ... Economics Evolving: A History of Economic Thought, Princeton University Press, ...
If a production function is homogeneous of degree one, it is sometimes called "linearly homogeneous". A linearly homogeneous production function with inputs capital and labour has the properties that the marginal and average physical products of both capital and labour can be expressed as functions of the capital-labour ratio alone.
In consumer theory, a consumer's preferences are called homothetic if they can be represented by a utility function which is homogeneous of degree 1. [1]: 146 For example, in an economy with two goods ,, homothetic preferences can be represented by a utility function that has the following property: for every >:
The original H–O model assumed that the only difference between countries was the relative abundances of labour and capital. The original Heckscher–Ohlin model contained two countries, and had two commodities that could be produced. Since there are two (homogeneous) factors of production this model is sometimes called the "2×2×2 model".
Under static price competition with homogenous products and constant, symmetric marginal cost, firms price at the level of marginal cost and make no economic profits. In contrast to the Cournot model, the Bertrand duopoly model assumes that firms compete on price rather than quantity.
Bertrand competition is a model of competition used in economics, named after Joseph Louis François Bertrand (1822–1900). It describes interactions among firms (sellers) that set prices and their customers (buyers) that choose quantities at the prices set.