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econ2300_-_topic_9_-_oligo.doc

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Department
Economics
Course
ECON 2300
Professor
All Professors
Semester
Winter

Description
Intermediate Microeconomic Theory I ECON 2300 – Summer 2011 – Mark Melatos Topic 9 – Oligopoly – July 19 Introduction - Few firms competing. - Products may be differentiated. - Firms earn LR profits > 0  barriers to entry. - Most common form of market structure. Examples include car manufacturing and aircraft manufacture (Boeing, Airbus). - Firms may compete in Q (Cournot) or P (Bertrand)  e.g. Airlines compete on price or # seats. Simultaneous Quantity Competition - The Cournot Model o Assumptions  2 firms (duopoly)  Homogeneous products  D curve known o Firms decide how much to produce at the same time. Each firm takes the output level of its competitor as fixed and then chooses its own output to maximise its profit. - The Stackelberg Model o Firm 1 (the ‘leader’) chooses output, q1. o
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