Buy custom Which of the Cournot and Bertrand models of Oligopoly more realistically reflect firm behaviour?
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| Topic: |
Business
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| Number of pages / Number of words: |
9 / 2357 |
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An example of how this works is if firm A sells 600 and firm B sells nothing firm A will get price P1 based of the market demand curve, if firm B then increases its sales to 300 the total quantity in the market will increase causing an extension along the demand curve and because of this firm A will now only get price P2...
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The basic idea is that the firm decides how much to produce and sell off of what the other firm sells; the firm decides this off its residual demand curve (how much is left in the market). The firm will have monopoly power over their consumers whose demand are not met by firm 2 and sets MC equal to residual MR to maximise profits (see fig1 in appendix) (Carlton & Perloff, 2005)...
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Which of the Cournot and Bertrand models of Oligopoly more realistically reflect firm behaviour?
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