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In a non-collusive oligopoly if one firm increased its price what would the other firms likely do? What about a price decrease?
Oligopoly is a type of market structure where there are few firms producing either homogeneous (goods that are perfect substitutes of each other) or differentiated goods (goods that are differentiated in some kind either in terms of quality, packaging, or marketing strategies, etc. Since there are few firms producing the goods, there is tough competition between them to gain maximum profits and market share.
Under the oligopolistic market structure, in some markets, the firms collude and take their price and output decisions together and they are called collusive oligopoly models. And, in some cases, these firms do not collude and act independently as separate firms taking their own price and output decisions and they are called a non-collusive oligopoly.
In a non-collusive oligopoly, the firms do not collude and take their decisions independently. They act in a way to maximize their profits and gain maximum market share and thus there is tough competition between them. Here, if one firm increases the price, the other firms don't follow and let that firm face loss of losing its customers that won't buy at that price. On the other hand, if one firm decreases the price, the other firms will follow and also decrease the price so that they themselves don't lose their customers. Thus, we can see that here, a price increase is not followed and a price decrease in followed.
This makes the demand curve of a non-collusive oligopoly with a kink in it. Since the price increase is not followed, the portion above the kind in the demand curve is relatively elastic and since the price decrease is followed, the portion below the kink in the demand curve is relatively inelastic. Thus, in the non-collusive oligopoly, the market price is inflexible and it remains at the kink point of the demand curve.
In a non-collusive oligopoly if one firm increased its price what would the other firms likely...
Cournot Oligopoly and Number of Firms In a Cournot oligopoly, each firm assumes that its rivals do not change their output based on the output that it produces. Ilustration: A Cournot oligopoly has two firms, YandZ. Yobservesthe market demand curve and the number of units that Z produces. It assumes that Z does notchange its output regardless of the number of units that it (Y) produces, so chooses a production level that maximizes its profits. The general effects of a...
Question (a) Price Rigidity can be seen in non-collusive (ie. competitive) oligopoly markets. Illustrate and explain a model that can be used to explain this occurrence. (30 marks) (b) Compare and contrast an oligopoly and a perfectly competitive market in relation to output levels produced. C Explain and illustrate using indifference curve analysis, the income and substitution effects if X is an inferior good and the price of X falls. D Explain the advantages of...
2. Suppos e there are two firms in an oligopoly, Firm A both firms charge a low price, each earns and Firm B. If $2 million in profit. If both firms charge a high price, each earns $3 million in profit. If one firm charges a high price and one charges a low price, customers flock to the firm with the low price, and that firm earns $4 million in profit while the firm with the high price earns $1...
11. If the individual firm tried to charge a higher price for its product: a) other firms would charge a lower price b) other firms would also chatge a higher price c) it would lose its customers d) the market price would rise 12. The individual firm has no incentive to charge a lower price for its product because: a) the effect on revenue and profit is unpredictable b) revenue and profit would be unchanged c) revenue and profit would...
Price in a competitive market is $6; the firms’ marginal cost is $4; What would you advise the firm to do? Lower its price Decrease its output Raise its price Increase its output
I just need part 1 answered!! 1. Two firms compete in price in a market for infinite periods. In this market, there are N consumers; each buys one unit per period if the price does not exceed $10 and nothing otherwise. Consumers buy from the firm selling at a lower price. In case both firms charge the same price, assume consumers buy from each firm. Assume zero production cost for both firms. A possible strategy that may support the collusive...
An oligopoly is a market structure in which: O one firm has 100 percent of a market. Othere are many small firms. there are many firms with no control over price. Othere are few firms selling either a homogeneous or differentiated product.
A firm can adjust along two spectrums: price, and quantity supplied. Describe how the firms below would be affected if they made the assigned adjustments. a. Perfect competition, increase in price b. Monopolistic competition, increase in price c. Oligopoly, decrease in price d. Monopoly, increase in quantity supplied, such that it is above equilibrium
Suppose a firm can charge a relatively low price to try to compete actively with its rivals, or it can charge a relatively high, collusive price. If its strategy is to charge the ow price regardless of the other firms' decisions, this low-prioe is the firm's O A dependent strategy OB, kinked strategy. OC. dominant strategy OD. independent strategy.
In a contestable market with one firm, the existing firm A. sets its price above the monopoly price. B. sets its price equal to the monopoly price. c. has no competition. D. sets its price lower than the monopoly price. O E. sets its price so that other firms will enter the market.