Answer to Question #227500 in Macroeconomics for sesheee

Question

Using suitable graphs, briefly explain the behavior and basic characteristics of following oligopoly models

a) Sweezy oligopoly model

b) Cournot oligopoly model

c) Stackelberg oligopoly model

d) Bertrand oligopoly model

Provide a real -world example of a market that approximates each oligopoly setting, and explain your reasoning

e) Cournot oligopoly model

f) Stackelberg oligopoly model

g) Bertrand oligopoly model

Answer 1

Kinked demand curve model or Sweezy model displays that price stability may exist with no collusion in oligopoly.

Cournot model tends to assume that all rival companies are producing homogenous product, and every attempt on maximizing profits through identifying the quantity to produce.

Stackelberg model is a model where a single company (the leader) chooses a quantity before other companies (follower).

In this model, companies independently identify prices so as to maximize profits.