Topic 13: Oligopoly Flashcards
1
Q
hotelling
A
spatial competition/model of oligopoly
captures many spectrums: taste, distance, ideology, etc.
- no transport costs
2
Q
best response in hotelling model
A
unless both locate at the same point, either has an incentive to move closer to the other and towards the centre
median voter theorem from social choice
3
Q
cournot model
A
strategic interaction - market-clearing price depends on decisions of both firms
mutual rationality
4
Q
bertrand model
A
existence of a second firm drives the industry to socially efficient price
5
Q
cournot vs bertrand
A
right variable (price vs. output) is the one that is stickiest
- if firms can change prices frequently, then capacity to produce is the fundamental strategic variable
