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Joseph Louis François Bertrand (1822–1900) developed the model of Bertrand competition in oligopoly. This approach was based on the assumption that there are at least two firms producing a homogenous product with constant marginal cost (this could be constant at some positive value, or with zero marginal cost as in Cournot).
Profit maximization using the total revenue and total cost curves of a perfect competitor. To obtain the profit maximizing output quantity, we start by recognizing that profit is equal to total revenue minus total cost (). Given a table of costs and revenues at each quantity, we can either compute equations or plot the data directly on a graph.
An oligopoly (from Ancient Greek ὀλίγος (olígos) 'few' and πωλέω (pōléō) 'to sell') is a market in which pricing control lies in the hands of a few sellers. [1] [2] As a result of their significant market power, firms in oligopolistic markets can influence prices through manipulating the supply function.
Classical economic theory assumes that a profit-maximizing producer with some market power (either due to oligopoly or monopolistic competition) will set marginal costs equal to marginal revenue. This idea can be envisioned graphically by the intersection of an upward-sloping marginal cost curve and a downward-sloping marginal revenue curve ...
p 1 = firm 1's price level pr unit; p 2 = firm 2's price level pr unit; b 1 = slope coefficient for how much firm 2's price affects firm 1's demand; b 2 = slope coefficient for how much firm 1's price affects firm 2's demand; q 1 =A 1-a 1 *p 1 +b 1 *p 2; q 2 =A 2-a 2 *p 2 +b 2 *p 1; The above figure presents the best response functions of the ...
A monopolist can set a price in excess of costs, making an economic profit. The above diagram shows a monopolist (only one firm in the market) that obtains a (monopoly) economic profit. An oligopoly usually has economic profit also, but operates in a market with more than just one firm (they must share available demand at the market price).
The difference between the company's average revenue and average cost, multiplied by the quantity sold (Qs), gives the total profit. A short-run monopolistic competition equilibrium graph has the same properties of a monopoly equilibrium graph. Long-run equilibrium of the firm under monopolistic competition.
Bertrand competition is a model of competition used in economics, named after Joseph Louis François Bertrand (1822–1900). It describes interactions among firms (sellers) that set prices and their customers (buyers) that choose quantities at the prices set.