Question

5. a.) Differentiate between the Cournot and the Bertrand model of Oligopoly.

b.) Consider an industry with two firms 1 and 2, each producing output Q1 and Q2 respectively and facing the industry demand given by P=140-Q, where P is the market price and Q represents the total industry output, that is Q= Q1 + Q2. Assume that each faces a marginal cost of ₹ 20 per unit with no fixed costs. Solve for the Cournot equilibrium in such an industry

30 Aug 2022
Answer :
Word Count : 752

A)

 

Aspect Cournot Model Bertrand Model
Number of Firms Two or more firms producing a homogenous product Two or more firms producing a homogenous or differentiated product
Production Decision Each firm decides how much output to produce, taking into account the output decisions of other firms Each firm assumes that all other firms will keep their output constant, and decides on its own price
Market Power Firms have market power due to limited competition Firms have limited market power due to competition and price transparency
Reaction Function Each firm's output decision depends on the other firms' output decisions, but assumes a fixed price Each firm's price decision depends on the other ___ _________ ______ ____ __________ _________ ________.
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Related Questions

5. a.) Differentiate between the Cournot and the Bertrand model of Oligopoly.

b.) Consider an industry with two firms 1 and 2, each producing output Q1 and Q2 respectively and facing the industry demand given by P=140-Q, where P is the market price and Q represents the total industry output, that is Q= Q1 + Q2. Assume that each faces a marginal cost of ₹ 20 per unit with no fixed costs. Solve for the Cournot equilibrium in such an industry

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