Managerial economics Business Strategy Chapter 9 Basic oligopoly models Michael R Baye, Managerial Economics and Business Strategy, 3e. CThe McGraw-Hill Companies, Inc, 1999
Michael R. Baye, Managerial Economics and Business Strategy, 3e. ©The McGraw-Hill Companies, Inc. , 1999 Managerial Economics & Business Strategy Chapter 9 Basic Oligopoly Models
Overview . Conditions for Oligopoly? II. Role of strategic Interdependence III. Profit Maximization in Four Oligopoly Settings Sweezy(Kinked-Demand) Model Cournot model Stackelberg Model Bertrand Model IV Contestable markets Michael R Baye, Managerial Economics and Business Strategy, 3e. CThe McGraw-Hill Companies, Inc, 1999
Michael R. Baye, Managerial Economics and Business Strategy, 3e. ©The McGraw-Hill Companies, Inc. , 1999 Overview I. Conditions for Oligopoly? II. Role of Strategic Interdependence III. Profit Maximization in Four Oligopoly Settings Sweezy (Kinked-Demand) Model Cournot Model Stackelberg Model Bertrand Model IV. Contestable Markets
Oligopoly Relatively few firms, usually less than 10 Duopoly -two firms Triopoly -three firms The products firms offer can be either differentiated or homogeneous Michael R Baye, Managerial Economics and Business Strategy, 3e. CThe McGraw-Hill Companies, Inc, 1999
Michael R. Baye, Managerial Economics and Business Strategy, 3e. ©The McGraw-Hill Companies, Inc. , 1999 Oligopoly • Relatively few firms, usually less than 10. Duopoly - two firms Triopoly - three firms • The products firms offer can be either differentiated or homogeneous
Role of strategic interaction What you do affects the profits of your rivals What your rival does affects your profits Michael R Baye, Managerial Economics and Business Strategy, 3e. CThe McGraw-Hill Companies, Inc, 1999
Michael R. Baye, Managerial Economics and Business Strategy, 3e. ©The McGraw-Hill Companies, Inc. , 1999 Role of Strategic Interaction • What you do affects the profits of your rivals • What your rival does affects your profits
An example You and another firm sell differentiated roducts How does the quantity demanded for your product change when you change your rice? Michael R Baye, Managerial Economics and Business Strategy, 3e. CThe McGraw-Hill Companies, Inc, 1999
Michael R. Baye, Managerial Economics and Business Strategy, 3e. ©The McGraw-Hill Companies, Inc. , 1999 An Example • You and another firm sell differentiated products • How does the quantity demanded for your product change when you change your price?