Book Mark Book Mark delicious
Oligopoly, Cournot's Oligopoly Model Homework Help, Tutoring
Home > Economics > Micro Economics > Product Pricing > Oligopoly, Cournot's Oligopoly Model
Tutors on NetTutors on Net
Condition, Output under perfect competition Assignment Help, Tutor Help
Oligopoly, Cournot's Oligopoly Model

Meaning of Oligopoly

            Oligopoly is a market condition, in which there are a few selling standardised of diverse commodities. It is hard to point out the number of industries in the oligopolist market. There may be more than two industries. It is also known to be rivalry amongst the few. With only a few industries in the market, the performance of one industry is tending to affect the others.

An oligopoly firm manufactures products either a standardised product or assorted commodities. The former is called perfect oligopoly and the subsequent is called imperfect oligopoly.

Cournot’s Oligopoly Model

Cournot model of oligopoly is perchance the prime model which explains the mannerism of a single industry under stipulations of monopoly and perfect competition.

An illustration would explain the oligopolistic situation in the market.

Illustration 2

Presume the market demand curve of a product is V = 140 – A. Assume that there are more than two industries and we are considering two industries for comparison, each with invariable marginal cost MC of $20.

  1. Supposing they perform as Cournot oligopolists, determine the price and total firm productivity.
  1. Compare with the result under pure monopoly and perfect competition.

Solution

Market demand for output is V = MC

  1. ⇒ 140 – A = MC

  2. ⇒ 140 – A = 20

  3. ⇒ A = 140 – 20

  4. ⇒ A = 120

Let us assume the productivities of the two industries as A1 and A2 and that the total productivity would be A1 + A2 = A.

  1. ⇒A1 = 120 – A2                     ………….Equation (1)
    2.                    2
  1. ⇒ A2 = 120 – A1                     ………….Equation (2)
    2.                    2
Substituting the value of A2 in Equation (1), we obtain the following
  1. ⇒ A1 = 120 – [ 120 – A1]
                                    2              
                                    2

  2. ⇒A1 = 120 – 60 + ½ A1
                               2

  3. ⇒A1 = 60 – 30 + ¼ A1

  4. ⇒A1 – ¼ A1 = 30

  5. ⇒¾ A1 = 30

  6. ⇒A1 = 30 x 4/3

  7. ⇒A1 = 40

By substituting A1 as 40, we get A2 as 40 and thus we can derive the total productivity as A = A1 + A2 = 40 + 40 = 80

To determine the price, using the task, V = 140 – A, we get

                                                            V (Value or Price) = 140 – (40+40) = 140 – 80
                                                            = 60

Hence Price V = 60, Total Productivity A = (A1 + A2) = 80

Condition 2

To compare with the results under monopoly and perfect competition, we have to compute as follows.

Marginal revenue under pure monopoly MR = Total Revenue / Total Quantity
And Total Revenue is Price x Quantity.

Here price is V and Quantity is A

While we substitute with Marginal Cost of $20, i.e. V = MC,
140 – (A1+A2) = 20

Let us assume A1 and A2 as 2A since this is pure monopoly and there cannot be two productivities. Now, in equilibrium productivity under monopoly MR = MC.

MR = 140 – 2A and MC is given as 20

140 – 2A = 20; 2A = 120

A = 60

Price under pure monopoly, V = 140 – A = 140 – 60 = 80.

(ii) Output under perfect competition

For equilibrium productivity under perfect competition

Price = MC

140 – A = 20; A = 120

Price under perfect competition = 140 – 120 = 20.

Online Live Tutor Condition, Output under perfect competition:

    We have the best tutors in Economics in the industry. Our tutors can break down a complex Condition, Output under perfect competition problem into its sub parts and explain to you in detail how each step is performed. This approach of breaking down a problem has been appreciated by majority of our students for learning Condition, Output under perfect competition concepts. You will get one-to-one personalized attention through our online tutoring which will make learning fun and easy. Our tutors are highly qualified and hold advanced degrees. Please do send us a request for Condition, Output under perfect competition tutoring and experience the quality yourself.

Online Oligopoly, Cournot’s Oligopoly Model Help:

    If you are stuck with an Oligopoly, Cournot’s Oligopoly Model Homework problem and need help, we have excellent tutors who can provide you with Homework Help. Our tutors who provide Oligopoly, Cournot’s Oligopoly Model help are highly qualified. Our tutors have many years of industry experience and have had years of experience providing Oligopoly, Cournot’s Oligopoly Model Homework Help. Please do send us the Oligopoly, Cournot’s Oligopoly Model problems on which you need help and we will forward then to our tutors for review.

Other topics under Product Pricing: