Two (or n) oligarchs in an industry are equally powerful, have homogeneous products, and pursue profit maximization.

Each oligarch makes output decisions simultaneously (looking at the other's output Make a decision to determine your own output)

Have the same average cost and marginal cost (AC, MC) and are constant.

There is no collusion between the two parties

No collusion

There is collusion

If the production (sales) volume when P=MC (perfect competition) is regarded as the total market If the capacity is QT, the equilibrium output of both parties with equal strength is 1/3QT, the total supply is 2/3QT. The Cournot model can also be extended to n oligarchs, each oligarch proposes The output supplied is 1/(n 1) QT, and the total market supply is n/(n 1)QT.

Product homogeneity

There is a difference in the strength of the two oligarchs. The stronger oligarch takes the lead in the competition. output decisions, and the weak oligarchs then make output decisions

Have the same average cost and marginal cost (AC, MC) and are constant

For B first, the decision is made after A, so it takes A's output as a given. Using MR=MC, the reaction function of B is: Q2=50- Q1 /2 For A, TR= P Q1, from MR=MC, the optimal output of A is Q1* =50, and substitute Q1* =50 into Q2=50- Q1 /2, there is the optimal output of B Q2*

concept

reaction function

Price leadership means that a certain company in an industry takes the lead in changing prices, and then Other companies later followed

The position of the leading enterprise is equivalent to that of a monopolist; while the position of other enterprises is equivalent to that of enterprises in a perfectly competitive market, that is, they are only passive recipients of prices. Output of Dominant Firm Price Leadership Model

Collusion - several companies are coordinating prices, controlling the quantity and distribution of products Joint agreements reached on allocating market share, sharing profits, etc.

Assumptions: • Several businesses are often evenly matched; • There is collusion between businesses.

in conclusion: • Maximize joint profits; • The market can often be divided up by coordinating prices to form market shares for each member

It is possible to set high prices like a monopoly to maximize the total profit of the entire industry

Distribution of theoretical output; MCA=MCB=…=MC(Q*)

Realistic allocation of output; the most influential and astute negotiators receive larger sales quotas

Economies of scale are strong because large companies can produce at a lower average cost

Facilitate the formation of industry standards

The ability to invest huge amounts of money in research and development is conducive to the company's continuous technological innovation

For differential oligopoly, it is beneficial to provide diversified products.

The efficiency is higher than that of a complete monopoly, but there is an efficiency loss: High cost, high price, small output,