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Oligopoly - Coggle Diagram
Oligopoly
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Cournot Model
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Cournot Equilibrium
The point in which firm correctly assumes how much its competitor will produce and sets its own production level accordingly
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Definition
Oligopoly model in which firms produce a homogeneous good, each firm treats the output of its competitors as fixed, and all firms decide simultaneously how much to produce.
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Each firm must decide how much to produce, and the two firms make their decisions at the same time.
Reaction Curve
Relationship between a firm’s profit-maximizing output and the amount it thinks its competitor will produce.
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Firm 1’s reaction curve shows how much it will produce a function of how much it thinks Firm 2 will produce
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Stackelberg Model
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To maximize profit, your competitor must take your large output
level as given and set a low level of output for itself
Cournot vs Stackelberg
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Industry has similar firms, none of which has a strong operating advantage => Cournot model
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Price Leadership
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One firm is implicitly recognized as the "leader," while the other firms, the"price followers" match its prices
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Cartels
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If market demand is sufficiently inelastic, the cartel may drive prices well above competitive levels
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Price Signaling
Form of implicit collusion in which a firm announces a price increase in the hope that other firms will follow suit
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