Microeconomic Theory, Price Policy in Oligopoly.

Microeconomic Theory Price Policy in Oligopoly Instr.: Dr. Michael Chletsos Submitted by: Maria Soulimioti Price-output behavior in Oligopoly The swerveed requisite curve: This copy was developed in 1939 by the economist Sweezy. It assumes that an oligopolist will bear rival firms to follow either set decrease it makes further non follow whatsoever increase. Thus the elasticity of use up for the firms intersection point is much great above the ruling price than on a lower floor it, and hence there is a kink in the fill curve confront by the firm. For straight line want curves the peripheral tax line lies halfway between the implore curve and the just axis. It is thus easy to show that the kink in the demand curve implies a discontinuity, i.e. a fulminant drop, in the peripheral revenue curve of the firm. Marginal live could thus vary greatly but still precipitate through this discontinuity in marginal revenue. Equally, changes in market demand could shift demand curves in and out without affecting the acme of the kink. In short, profit maximising at MC=MR could perish price unaffected in spite of considerable fluctuations in costs and demand. The model has been used to let off wherefore prices appear to fluctuate less in oligopolistic markets than in hawkish markets. The model has serious soils, however: again it implies a fellowship of marginal costs and revenue not feature by real firms; it is not displace that entrepreneurs hold such hopeless expectations of the reactions of their competitors: the evidence on price stickiness is not as clear cut as many believe. But the great flaw is that the model does not formulate price determination, i.e. it does not explain how the prevailing price was established or what happens when the price is eventually changed. Collusive Pricing: Rivalry usually results in write down profits than could be achieved through... If you want t o get a naughty essay, order it on our web! site: OrderCustomPaper.com

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