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 turn of eventsed requisite curve: This stumper was developed in 1939 by the economist Sweezy. It assumes that an oligopolist will attend rival firms to follow either set decrease it makes moreover non follow whatsoever increase. Thus the elasticity of necessary for the firms harvest-tide is much great above the ruling price than on a lower floor it, and hence there is a kink in the lease curve confront by the firm. For straight line crave curves the peripheral tax line lies halfway between the carry curve and the just axis. It is thus easy to show that the kink in the demand curve implies a discontinuity, i.e. a jerky drop, in the peripheral revenue curve of the firm. Marginal terms could thus vary greatly but still cover through this discontinuity in marginal revenue. Equally, changes in market demand coul d shift demand curves in and out without affecting the lift of the kink. In short, profit maximising at MC=MR could vanish price unaffected in spite of considerable fluctuations in costs and demand. The model has been used to let off why prices appear to fluctuate less in oligopolistic markets than in militant markets. The model has serious stigmas, however: again it implies a cognition of marginal costs and revenue not feature by real firms; it is not draw in that entrepreneurs hold such disheartened 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 relieve price determination, i.e. it does not explain how the prevailing price was established or what happens when the price is ultimately changed. Collusive Pricing: Rivalry usually results in baffle profits than could be achieved through... If you want to get a mystifying essay, order it on our website:! OrderCustomPaper.com

If you want to get a full essay, visit our page: write my paper