Oligopoly - thebusinessguys.ie Before, when we looked at Perfect and Imperfect Compe@@on, we ... Kinked Demand Curve with Price and Quan-ty for an Oligopolis-c Firm 10) ...

LCEconomicswww.thebusinessguys.ie©

Oligopoly

Before,whenwelookedatPerfectandImperfectCompe@@on,weno@cedthatfirmsinthesemarketsactedindependentlyofeachother.

Thatis,eachfirmdidnottaketheac@onsofotherfirmsintheindustryintoaccount.However,ifwelookattheairlineorbankingindustry,weseethattherearemanybuyerspurchasingfromonlyafewlargefirms

andeachfirmisconsciousofwhattheotherfirmsaredoing.Ifonebanklowersitscharges(price),weseethatotherbanksrespondtothischange

byeitherchangingtheirpricesorbyofferingsomeotherincen@vetoaHractcustomers.

Fromthiswesaythatthesefirmsareinterdependent.When

thereisamarketcontainingasmallnumberoflargefirmsac@nginterdependently,itiscalledanOligopoly.

Assump-ons

1)FewSellersintheIndustry:Becauseofthiseachsellercaninfluence

thepriceofthecommodityortheoutputsold.

2)InterdependencebetweenFirms:Firmsinoligopolydonotact

independentlyofeachother.Theywilleachtakeintoaccountthelikelyreac@onsoftheircompe@tors,hencepricestendtoberigid.

3)ProductDifferen-a-onOccurs:Thecommodi@eswhichfirmssellare

[email protected]@singtopersuadeconsumerstobuytheirproductratherthanacompe@tor’sproduct.

4)BarrierstoEntry:Thesearecommoninanoligopolis@cmarketasexis@ngfirmswillwishtomaintaintheirshareofthemarket.Examplesof

barriersinclude:highcostsofseTngupintheindustry,brandprolifera@onetc.

AnOligopolis-cMarket:isamarketwithalargenumberofbuyerspurchasingfromasmallnumberoflargefirms,andthesefirmsmakedecisionstoincreasesaleswhiletakingintoaccountthepossiblereac@onsofcompe@tors.

ProductDifferen-a-on:meansthatproductssoldbycompe@ngfirmsaresimilarbuthavedifferences.Thereareclose(butnotperfect)subs@tutesavailable.

JonathanTraynor


5)CollusionmayOccur:Firmswithintheindustrymaymeettocontrol

theoutputintheindustryorcontrolpricese.g.OPEC.

6)Non-PriceCompe--onisMoreCommonthanPriceCompe--on:Duetothefearofhowcompe@torswillreact,firmstendnottoengagein

pricecompe@@onbutrathertheyengageinnon-pricecompe@@ontogainconsumers.

ExamplesofNon-PriceCompe--on

a)SponsoringCommunityEvents

b)FreeGi\s

c)Specialintroductorypricefornewcustomers

d) Increasingthequalityoftheservice

BarrierstoEntry:Aretheforcesatworkwhichpreventordeterotherfirmsfromenteringintotheindustry

Collusion:isanyac@ontakenbyseparateandrivalcompaniestorestrictcompe@@onbetweenthemwithaviewtoincreasingtheirtotalprofits

LimitPricing:occurswhenexis@ngfirmsinanOligopolis@cmarketchargeapricelowerthanthepricetheycouldchargeinordertodiscouragetheentryofnewfirmsintothemarketortoforceunwantedentrantsoutofthemarket.

Non-PriceCompe--on:occurswhenfirmstrytoincreasetheirmarketsharewithoutchangingtheirprice.

PriceCompe--on:iswhenfirmscompetewithotherfirmsonthebasisofprice

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BarrierstoEntry

Intheassump@onswesaidthatbarrierstoentryexistinanOligopolis@cmarket.Thesearethethingsthatstopotherfirmsenteringtheindustry.WewillnowlookatwhatbarrierstoentryexistinOligopoly.

1) HighStartUpCosts:SomeOligopolis@cfirmsoperateonsuchalargescalethatthecostsofstar@ngupintheindustryfacedbypoten@alentrantsissohighthatitwouldbeunprofitabletosetupanewfirminopposi@ontotheexis@ngones.

2) LimitPricing:Whennewfirmsentertheindustry,exis@ngOligopolis@cfirmsmayallagreetoeachlowertheirprice,inthehopethatthenewentrantisunabletomatchthispriceandassuchisforcedoutoftheindustry.

3) EconomiesofScale:Exis@ngfirmsmayenjoyhugeeconomiesofscaleinadver@singwhichinducesbrandloyaltyandreducescustomer’swillingnesstotrynewbrands.

4) ChannelsofDistribu-on:Exis@ngfirmsmaycontrolthesupplyofgoodstoretailersandrefusetosupplyretailersthatcarrytheproductsofnewfirms.

5) BrandProlifera-on:Thisiswhereeachexis@ngfirmproducesandadver@sesseveralbrandsthuslimi@ngthemarketavailabletopoten@alnewentrants.E.g.BothProctorandGamble;andUnileverproducewashingdetergent.

Proctor and Gamble produces

Daz Ariel

Tide Dre\

Bold Fairyandmore

Unilever Produces

Surf Oms

Persil Luxandmore

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NOTE:ProctorandGambleandUnileveroperateinwhatiscalledaduopololy.Itisanoligopolywithonlytwofirms.

ItisimportanttonotethatthereisnoonetheoryofOligopolythataccuratelydescribestheequilibriumofanOligopolis@cfirminallcases.Thisisunliketheothermarketstructuresthatwehavestudied(PerfectCompe@@on,ImperfectCompe@@onandMonopoly)wherewecanaccuratelypredicttheirac@onsandequilibriuminboththeShortRunandtheLongRun.

ThebehaviourofanyOligopolis@cfirmdependsontheindustryitisin(banking,petroleum,insurance,foodchains)andhowitreactstoitscompe@torsdecisionsandhowitbelievesitscompe@torswillreacttoitsdecisions.

WewillnowlookatanumberofideasthathavebeenputforwardtotrytoexplainthedifferentaspectsofOligopolis@cmarkets.

BrandProlifera-on:iswhereeachexis@ngfirmproducesandadver@sesseveralbrandsthuslimi@ngthemarketavailabletoanewentrant.

JonathanTraynor�4


Explana-onforS-ckyPrices–TheKinkedDemandCurve

(SweezyModel)

Theexplana@onthatfollowsispurelytohelpyouunderstandthetheoryoftheKinkedDemandCurvefacedbyanOligopolis@cfirm.Youdonot

needtolearnthisatall.Justunderstanditandthenlearnofftheexplana@onoftheKinkedDemandCurvethatfollows.

Intheassump@onswesaidthatpricesinanOligopolis@cmarkettendto

berigid(tendnottochangeover@me).AnexpressionusedtodescribethisaHributeisthatOligopolis@[email protected]

ordertotrytoexplainthisphenomenon,economistPaulSweezyputforwardtheideaoftheKinkedDemandCurve.Seegraphbelow.

JonathanTraynor�5

Price

Quan@ty

AR/D

PEq

QEq


Wewillnowderivehowhecametothisconclusion.

1)Weknowfromtheassump@onsthatfirmsactinterdependentlyandas

sucheachfirmtakestheac@onsoftheotherfirmsintoaccount.Thereforeifonefirmdecreasespricetotrytogainagreatershareofthe

market,otherfirmswillalsodecreasetheirprice.Assuch,thereisnobenefittoanyofthefirmsfollowingapricedecrease.Therefore,inrela@ontodecreasingprices,Oligopolis@cfirmsfaceanInelas@cDemand

Curve(AverageRevenueCurve).Seegraphbelow.

Inelas-cAverageRevenueandMarginalRevenueCurves

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Price

Quan@ty

AR/DMR


2)Also,ifafirmincreasesitsprice,otherfirmswillreacttothisbynotchangingtheirprice.Assuchtheotherfirmswillbesellingasimilargood

foracheaperpriceandenjoyanincreasedmarketshare.Assuchthefirmthatincreaseditspricewilllosealotofcustomerstoitscompe@ngfirms.

Therefore,inrela@ontoincreasingprice,oligopolis@cfirmsfaceanElas@cDemandCurve(AverageRevenueCurve).Seegraphbelow.

Elas-cAverageRevenueandMarginalRevenueCurves

3)Therefore,Oligopolis@cfirmsreallyfacetwodifferentAverageRevenue

Curves(DemandCurves).TheInelas@cDemandCurveforpricedecreasesandtheElas@cDemandCurveforpriceincreases.Seegraphoverleaf.

JonathanTraynor�7

Price

Quan@ty

AR/D


4)Therefore,allfirmsarereluctanttochangetheirpricesasanychangeinpriceresultsinalossinrevenue.AssuchallfirmswillseHleforthepricewherethetwoDemandCurves(AverageRevenueCurves)intersect.

Evenifanindividualfirmsuffersanincreaseincosts,thefirmwouldprefertoabsorbthisdropintheirprofitsinsteadofincreasingtheirprice

andlosesales.Ifcostsfall,thefirmwillnotpassonthelowerpricetotheconsumerasthismaycauseapricewarwithcompe@tors.ThisreluctanceofOligopolis@cfirmstochangepriceiswhatisknownasPriceRigidity.

5)ThefirmknowsthatifitincreasesitspriceabovePEq,itwillfacethe

Elas@cDemandCurve(AverageRevenueCurve).Therefore,theInelas@cAverageRevenueandMarginalRevenueCurvesabovethispricenolongerapplytothefirm.

PriceRigidity:referstothetendencyforpricesnottochange,evenifthefirm’scostschange,inordertoavoidreac@onfromcompe@tors.

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MR

Price

Quan@ty

AR/DEL

AR/DInel

PEq

QEq


6)Also,thefirmknowsthatifitdecreasespricebelowPEq,itwillfaceanInelas@cDemandCurve(AverageRevenueCurve).Therefore,thoseparts

oftheElas@cAverageRevenueandMarginalRevenueCurvesbelowthispricenolongerapplytothefirm.

7)Thisleavesthefirmfacingwhatiscalleda“KinkedDemandCurve”anda“KinkedMarginalRevenueCurve”.Seethegraphbelow.

KinkedAverageandMarginalRevenueCurves

8)IfwelookattheMarginalRevenueCurveabove,weseethatbetween

[email protected],foradownwardslopingAverageRevenueCurve,mathema@cally,MarginalRevenuemustbeslopingsteeperthanAverageRevenue.AsAverage

RevenuedropssosteeplyatpointX,thiscausesMarginalRevenuetofallver@callyforapor@on(thedistancebetweenaandb).Thewholeline,

JonathanTraynor�9

Price

Quan@ty

AR/DMR

X

a

b


includingthever@caldrop,istheMarginalRevenueCurvefacedbyanOligopolis@cfirm;it’sjustanunusualshape.

9)AssumingthatthefirmisaProfitMaximiser(whichaswesaidintheassump@onsisnotalwaystrue),thefirmwillproducewhereMC=MR

[email protected].

KinkedDemandCurvewithPriceandQuan-tyforanOligopolis-cFirm

10)AriseinMarginalCosts,fromMC1toMC2,doesnotchangeeitherthe

pricechargedorthequan@tysupplied.ThisisbecausethefirmisaProfitMaximiser(forthismodelofOligopolyatleast)andproduceswhereMC=MRandMCisrising.Duetothever@calsegmentintheMRcurve

(thesegmentfrompointatopointb),ariseinMCs@llresultsinquan@tyQEqbeingsuppliedandpricePEqbeingcharged.Seegraphoverleaf.

JonathanTraynor�10

Price

Quan@ty

AR/DMR

X

a

b

!

MC

QEq

PEq


OligopolistAbsorbingCostIncreases

11)Fromthisra@onale,weseethatanOligopolis@cfirmmayabsorba

riseincostwithoutincreasingpriceasaresult.

12)Ifafirmwastoincreasepriceduetoanincreaseincosts,itwouldlosemorerevenueasaresultofthepriceincreasethanitwouldfrom

absorbingthecost.ThisgivesrisetowhatisknownasPriceConstancy


Price

Quan@ty

AR/DMR

X

a

b

!MC1

!MC2

PEq

QEq


L.C.QUsingaClearlyLabeledDiagram,Explaintheshapeofthe‘kinked’demandcurvefacingafirminOligopoly

ShapeoftheDemandCurve

Demandcurve-AB

Ifthisfirmincreasesitspriceotherswillleavetheirpricesunchangedso

thisfirmwilllosemanycustomers–thispor@onoftheDemandCurveiselas@c.

Demandcurve–BC

Ifthisfirmlowersitspriceotherswillmatchthispricedecreasesothisfirmwillgainfewaddi@onalcustomers–thispor@onoftheDemand

Curveisinelas@c.


Price

Quan@ty

AR/D

P1

A

B

C


UsingaClearlyLabelledDiagram,Explainthelongrunequilibriumposi-onofanOligopolis-cfirm

TheLongRunEquilibriumPosi-onofanOligopolis-cfirm

1) Equilibrium:EquilibriumoccursatpointGwhereMC=MR(andMCisrising).

2) PriceandQuan-ty:ThefirmwillproduceQ1andsellthisoutputat

priceP1

3) Costs:Thefirm’scostofproduc@onisshownatpointG.

4) RiseinCosts:ShouldcostsrisebetweenpointsDandEthenmarketpricetendstoremainconstantatP1.

5) Profits:ThisfirmisearningSNPsbecauseARexceedsACandbarriers

toentryexist.


Price

Quan@ty

AR/D

P1

A

B

C

Q1

!MC

!

AC

MR


PriceConstancy

LikePriceRigidity,PriceConstancyinvolvesleavingthepriceofthegood

unchanged.ItdiffersfromPriceRigidityinthatthereasonfornotchangingthepriceisthatitmayactuallycostmoretochangetheprice

ratherthantakeasmalldentinprofits.

E.g.Iftheownerofarestaurantfindsthathiscostsarerising,butonlyslightly,hemaynotincreasethepriceschargedasthiswouldinvolve

reprin@ngallthemenusandchangingadver@sedprices.Thiscouldprovetobemoreexpensivethanhisslightincreaseincostsandassuchthe

ownerleavesthepricesunchanged.

Evalua-onoftheSweezyModel

1)TheSweezymodelaccuratelydescribedOligopolis@cmarketsinthe1930’s(therewasagreatdepressionandfirmshadexcesscapacity).

2)However,duetotheoilshocksinthe1970’sand80’s,highinfla@onandincreaseinwages,Oligopolis@cfirmsraisedpriceswithoutsufferingagreatlossindemand.

3)Anotherproblemwiththismodelisthatitdoesnotexplainhowtheini@alequilibriumprice,PEq,wasset.

Inindustrieswhereitisdifficultforfirmstoraisepriceswithoutsufferingaseriousdeclineinrevenue,thereisanincen@vetoengageincollusion

towhichwenowturnouraHen@on.



FormsofCollusion

Intheassump@onswesaidthatcollusionmayexistinanOligopoly.Wewillnowlookatthedifferentformsofcollusionthatcantakeplace.

1)PricingPolicy/LimitPricing:Onefirm,withthetacitagreementofothers,couldreducepricesforcingunwantedentrantsoutoftheindustry.

2)Produc-on/OutputPolicy:Firmscouldjointogethertolimitoutputtocertainagreedamounts.

3)SalesTerritories:Firmscoulddivideupthemarketsbetweenthemandagreenottocompeteineachother’smarketsegments.

4)Refusaltosupplyfirms:Firmsmaynotsupplythosefirmswhobuy

fromfirmsnotinthecartel.

5)ImplicitCollusion:Eachfirmrecognisesthatbehavingasiftheywere

branchesofasinglefirm,theirjointprofitswouldbehigher.SofirmsdonotprovoketheirrivalsbycuTngprices.Insteadtheytrytoincreasemarketsharebyengaginginnon-pricecompe@@vemeasures.

MostoftheformsofcollusionaboveareknownasExplicitCollusion

However,inmanyOligopoliesaroundtheworld,firmsmaynothaveanexplicitarrangement,butbyfollowingeachother’sac@ons,maycometoanimpliedagreementwhichreducescompe@@onandraiseseachoftheir

profits.ThistypeofcollusionisknownasImplicitCollusion.

Collusion:isanyac@ontakenbyseparateandrivalcompaniestorestrictcompe@@onbetweenthemwithaviewtoincreasingtheirtotalprofits

ExplicitCollusion:occurswhenseparatecompaniesjointlydecideonaspecificcourseofac@on,toreducecompe@@onbetweenthem,withaviewtoincreasingtheirtotalprofits.I.e.thereisanagreedarrangement.

ImplicitCollusion(TacitCollusion):occurswhenthereisnoformal

agreementbetweenfirms,buteachfirmactsinanon-compe@@vewayinordertoincreaseprofits.



PriceLeadership

Thismeansthatthemostdominantfirmintheindustrysetsitspriceand,inordernottoengageinPriceCompe@@on,thesmallerfirmsinthe

industrysetthesamepricefortheirgoodswithoutanyexplicitagreement.

TheideaofPriceLeadershiphasbeenusedinconjunc@onwithorasanalterna@vetotheKinkedDemandCurve.WhenitisusedwiththeKinked

DemandCurveModel,itisgivenasthemethodbywhichthemarketreachestheequilibriumprice.Whenitisusedasanalterna@vetotheKinkedDemandCurve,itissaidthatitisPriceLeadershipalonethat

causesPriceRigidityandnottheKinkedDemandCurve.

Aswesaidintheassump@ons,firmstendnottoengageinPrice

Compe@@on.Thisisduetothefactthatifonefirmlowerstheirprice,allotherfirmsadoptthesametac@[email protected],eachfirmiss@llsellingthesameamountofgoods

astheywerebeforethepricedecrease,butnowtheyaresellingthesegoodsatalowerpriceandassucheachfirmisworseoffasaresult.This

givesrisetothefactthatOligopolis@cfirmsengageinNon-PriceCompe@@on.WewillnowdiscusstheProsandConstotheconsumerofNon-PriceCompe@@on.

PriceLeadership:occurswhenthelargestsuppliersetsitspriceandthesmallerrivalsfollowitslead.

PriceCompe--on:iswhenfirmscompetewithotherfirmsonthebasisofprice



BenefitstotheConsumerofNon-PriceCompe--on

1) PriceStability:Non-PriceCompe@@onresultsinconstantpricesthusmakingiteasierfortheconsumertobudgetforthesegoods.

2) Be[erQualityProducts:Asfirmsdonotwishtocompeteon[rice,theonlywaytheycancompeteisbythequalityoftheirproductandtheira\ersalesservice.Thisresultsinahigherstandardofproduct

deliveredtotheconsumer.

3) BenefitsofAdver-sing:Asaformofadver@sing,differentfirms

sponsorspor@ngclubs,[email protected]@es,theyareincurringabenefitfromNon-PriceCompe@@on.

4) ConsumersaremoreInformed:Asaresultoftheadver@sing

employedbyeacholigopolis@cfirm,consumersbecomemoreinformedabouteachpoten@alproductandassucharebeHerableto

buythegoodthatbestsuitstheirneeds.

5) ConsumerLoyaltyisRewarded:Acertaintypeofcreditcanaccruetothecustomerfromconstantlyshoppinginonebusinessorconstantly

buyingthesamegood.E.g.ClubcardpointsinDunnes

ThelistaboveisthebenefitstoconsumersofNon-PriceCompe@@on.Howeverineverycase,PriceCompe@@onisbeHerfortheconsumer.WewillnowlookatwhyconsumerspreferPriceCompe@@on.

ReasonswhyConsumersPreferPriceCompe--on

1) CheaperPrices:Thefirstandmostimportantaspectofwhy

consumerspreferPriceCompe@@onisthatitensurescheaperprices,resul@nginanincreaseinconsumer’srealincome.

2) GreaterChoice:UnderPriceCompe@@on,nonefficientfirmsare

forcedoutoftheindustry.Assuch,thesepeoplewhofindthemselvesunemployedsearchforanicheinthemarkettogainemployment.

Whentheyfindthisnichetheyeithersetuptheirownfirmorworkin

Non-PriceCompe--on:occurswhenfirmstrytoincreasetheirmarketsharewithoutchangingtheirprice.



abusinessthatprovidestheconsumerwithdifferentgoodsgivingthemagreaterchoice.

3) HigherCostsinNon-PriceCompe--on:The“extras”thatareofferedtotheconsumerunderNon-PriceCompe@@oncauseariseinthe

priceofthegoodwhichresultsinareduc@oninconsumer’srealincome.

4) UnwantedExtras:Manyoftheextraoffersthatareincludedwiththe

goodinNon-PriceCompe@@onarenotdesiredbytheconsumerandassuchareofnobenefitthem.

5) ExtrasnotUsed:Consumersfrequentlydonotusethevouchersorgi\tokensthattheyreceiveinNon-PriceCompe@@onandassuchthese“extras”aresomethingthattheconsumerneverreceives.

Objec-vesoftheFirmotherthanProfitMaximisa-on

Uptothispointinourcoursewehaveassumedthatthemainobjec@ve

ofeveryfirmistomaximiseprofits.Inrealitythisisagoodassump@onasitaccuratelyrepresentsthemainobjec@[email protected],therearereasonswhyfirms

mightnotwishtomaximiseprofitsandweshallnowlookatthesereasons.

Types of Non-Price Competition

SpecialOffers “X%ExtraFree”

Compe@@ons LocalandNa@onalSponserships

FreeGi\s FreeSamples

Coupons LoyaltyPoints



ReasonswhyfirmsmaynotpursueProfitMaximisa-on

or

Objec-vesthatOligopolis-cfirmsmayhaveotherthanProfitMaximisa-on

1) FearofGovernmentInterven-on:FirmsmayfearthatverylargeSuperNormalProfits(SNP)mightaHractgovernmentaHen@onintheformoffurtherregula@onsorincreasedtaxes.Inordertoavoidthis,thefirmsmaydecidetoproduceacertainlevelofoutputotherthanthatlevelofoutputwhichmaximisesprofits.(WhereMC=MRandMCisrising).

2) FearCompe--on:AfirmmayfearthatverylargeSuperNormalProfits(SNP)mightaHractnewfirmsintotheindustry.Topreventthis,thefirmmightengageinLimitPricing,seTngpricessolowinordertodiscouragenewfirmsfromenteringtheindustry.Thefirmsufferslowerprofitsintheshortruninordertogainsustainedprofitsinthelongrun.

3) LessWork:Theownersofthebusinessmayprefertoearnstable/moderatelevelsofprofitsratherthanconstantlystrivingforlargesupernormalprofitsasthisiswhattheyaresa@sfiedwith.

4) LackofIncen-ve:Wherethemanagersarenotownerstheymaytendtowardsamoreconserva@veapproachratherthanadynamicdrivetoprofitmaximisa@on.

5) SalesMaximisa-on:Onceaminimumlevelofprofitisearnedtorewardshareholders,providefundsforreinvestmentetc.thefirmmayconcentrateonmaximisingsales;increasingitsshareofthemarket.Itmaywishtoachieveeconomiesofscale;decreasethelevelofsalesofrivalfirms;becomethemostdominantfirminthemarket.



TheBaumolModelofSalesMaximisa-on

Aswesaidintheprevioussec@on,somefirmsmaywishtopursuepoliciesofsalesmaximisa@[email protected],thefirmwillsetanini@allevelofprofitthattheywishtoearnandsellasmanygoodsaspossibleconsistentwiththislevelofprofit.ThisideawasfirstputforwardbyProfessorWilliamBaumol.Seegraphbelow.

Ifwelookatthegraphabove,weseethatthelinePIrepresentstheini@allevelofprofitsetbythefirm.ThecurvePrepresentstheprofitfunc@on.Atlowlevelsofoutputtheprofitfunc@onrises,showingthatanincreaseinoutputresultsinanincreaseinprofit.(WhereMR>MC).

Theprofitfunc@on/curve,reachesitspeakatquan@tyQMAX.Thisisthemaximumlevelofprofitthatthefirmcanearn.Ifthefirmproducesonelessgoodoronemoregoodthanthisprofitmaximizingquan@ty,afallin


Price

Quan@ty

!ProfitCurve(P)

QMAX

PI

Q1 Q2QBE


profitswouldresult.MaximumProfitoccursatthelevelofoutputwhereMC=MRandMCisrising.

Beyondquan@tyQMAX,weseethattheprofitfunc@onstartstofallagain.Showingthatanincreaseinoutputresultsinadecreaseinprofits.(WhereMC>MR).

NOTE:Atverylowlevelsofoutputthefirmissufferingaloss.ThisisduetothefactthatFixedCostsareincurredevenifthefirmproducesnothing.Thefirmdoesnotbreakevenun@[email protected]\erquan@tyQBEthefirmbeginstoearnaprofit.

Ifwedropaperpendicularlineformwheretheini@alprofitline(PI)cutstheprofitcurve(P);wefindthetwoquan@@esthatthefirmcouldproduceinordertoearntherequiredlevelofprofit.Thesetwoquan@@[email protected],theywillproducethequan@tyQ2,thisisthelevelofoutputthatearnsthefirmthegreatestmarketshareconsistentwiththeini@allevelofprofit.

Ifthefirmisaprofitmaximiser,theywillproducequan@tyQMAX.

Ifthefirmwishestojustreachtheini@alprofitlevelandisnotconcernedwithprofitmaximisa@onormarketshare,thentheywillproducethequan@tyQ1.


Oligopoly - thebusinessguys.ie Before, when we looked at Perfect and Imperfect Compe@@on, we ... Kinked Demand Curve with Price and Quan-ty for an Oligopolis-c Firm 10) ...

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