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Intermediate MicroeconomicsMarket Structure, Industrial Organisation: Oligopoly
Agribusiness Teaching CenterEaster Term 2015
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Market Structure
The interconnected characteristics of a market, such as the number and relative strength of buyers and sellers and degree of collusion among them, level and forms of competition, extent of product differentiation, and ease of entry into and exit from the market
Four basic types of market structure are (1) Perfect competition: many buyers and sellers, none being able to influence prices. (2) Oligopoly: several large sellers who have some control over the prices. (3) Monopoly: single seller with considerable control over supply and prices. (4) Monopsony: single buyer with considerable control over demand and prices.
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Competitive Market
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Monopolistic Market
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Oligopolistic Markets
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OligopolyAntoine Augustin Cournot Competition
Simultaneously choosing the quantity to produce.Acknowledging the existence of the other producer.In equilibrium neither firm has incentive to change its output decision (Nash equilibrium).
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Cournot DuopolyBest Response and Residual Demand
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Cournot DuopolyBest Response and Residual Demand
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Cournot DuopolyBest Response
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Cournot DuopolyBest Response
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Cournot DuopolyBest Response in Normal Form
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Cournot DuopolyBest Response in Normal Form
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Cournot EquilibriumBest Response in Normal Form
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Cournot EquilibriumBest Response: Graphical Interpretation
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Cournot EquilibriumStability Issues
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Oligopoly
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Cournot ModelBig Assumption
Firms Treat Rivals as Equals
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Cournot ModelFirm treat rivals as equals
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Cournot ModelFirm treat rivals as equals
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Cournot ModelFirm treat rivals as equals
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Cournot ModelFirm treat rivals as equals
What’s Next?
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Cournot ModelFirm treat rivals as equals
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Heinrich Freiherr von Stackelberg EquilibriumAsymmetric Competition
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Stackelberg EquilibriumThe Algebra
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Stackelberg CompetitionThe Equilibrium
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Forchheimer CompetitionDominant Firm with Competitive Fringe
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Joseph Louis François Bertrand Competition
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Joseph Louis François Bertrand Competition
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Francis Ysidro Edgeworth Competition
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Francis Ysidro Edgeworth Competition
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Kreps-Scheinkman Competition
Assume Bertrand price-competition while firms decide on their capacity before deciding how much to price (two-stage game)
‘Bertrand’ competition delivers Cournot results with equal price levels.
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Tacit CollusionCartels