Question: Explain how the residual demand curve confronting the dominant firm
Explain how the residual demand curve confronting the dominant firm in the dominant firm model is derived. In this derivation, what is assumed regarding how the output of other firms is determined? How does it differ from the Cournot assumption?
Answer to relevant QuestionsExplain how equilibrium is determined in the dominant firm model. If market demand increases, how will a new equilibrium be determined?Suppose that Iraq is the Stackelberg leader in the preceding problem. What will be each country’s reaction function? How much will each country produce, and what will its profits be?In an analysis of the automobile industry, what factors would you consider in determining whether to use the competitive model, the monopoly model or one of the oligopoly models?Why do you think that game theory has become the preferred method of analyzing oligopolistic markets? What advantages does it have over simply assuming, say, Cournot behavior?Suppose that a college town has a large number of firms selling a homogeneous product—pizza—and that there are two types of consumers in the town. The town’s permanent residents are fully informed about the prices ...
Post your question