Oligopoly Theory (Cambridge Surveys of Economic Literature) by James Friedman

By James Friedman

James Friedman presents an intensive survey of oligopoly idea utilizing numerical examples and cautious verbal motives to make the tips transparent and available. whereas the sooner rules of Cournot, Hotelling, and Chamberlin are awarded, the bigger a part of the e-book is dedicated to the fashionable paintings on oligopoly that has resulted from the appliance of dynamic concepts and online game idea to this sector of economics. The e-book starts with static oligopoly thought. Cournot's version and its newer embellishments are coated within the first great bankruptcy. Then the Chamberlinian research of product differentiation, spatial pageant, and features area is determined out. the following chapters on smooth paintings take care of response services, advertisements, oligopoly with capital, access, and oligopoly utilizing noncooperative video game idea. a wide bibliography is equipped.

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1(21 + n)qt = 0. Solving for qt yields Total industry output is Q = nqt = 950^/(21 + n), market price is p = 100 - 95«/(21 + n\ and profit for the rth firm is <225) A glance at these equations reveals that qt must fall as n, the number of firms, increases, but at the same time, Q increases. With total industry output rising as n rises, market price falls. It also appears that Q goes to 950 as n goes to infinity, with price going to 5; however, the presence of thefixedcost, a, implies an upper limit to the possible value of n.

Condition ensures that the profit-maximizing output for firm / is a continuous function of the output levels of the other firms. 3 Proof of the existence and uniqueness of the Cournot equilibrium may be found in the work of Friedman (1977) or Szidarovsky and Yakowitz (1977). Szidarovsky and Yakowitz provide an insightful proof of uniqueness by linking the firm's profit-maximizing output level to the total industry output, showing the optimal qt falls as Q rises. This proof can be illustrated using the fishing example.

Qt_l9 qi+l9 . . , qn). ,,. . /+1, . . , qn), and denote the new form of the first-order condition by qt = wt(qt) for / = 1, . . , « . The system of equations qt = w^g,) for / , . . , « can be turned into a system of difference equations: q* = Wi(qu-i) or qt = w{qt_x) = (wx{qx\ . . , wn(qn)) It is as if each firm makes a dated sequence of output decisions, seeking with each decision to maximize its current-period profit, and with each firm assuming that its rivals' current (time t) output levels will be unchanged from the previous time period (t — 1).

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