As this is a function of two independent variables we can derive the isoprofit curve for A, for each level of (YA, YB).
Setting the parameter a = 100 and using the Excel Data Table we can build and graph each isoprofit function in the (YA, YB) space ( Fig. 6.12-2 ).
6.12-3 and Fig. 6.12-4 are both plotted in the (YA, YB) space, with YA always graphed on the horizontal axis and YB always on the vertical axis (IP stands for isoprofit).
The new strategic adjustable one to establishes the decision each and every duopolist is the total amount (during Bertrand design is the price).
6.12-5 . If the duopolist B decides for a quantity YB = , the duopolist A, to maximize the profit, will have to choose to stay on the isoprofit curve such that the slope is zero (i.e., the isoprofit IP A 1000) producing therefore the quantity YA = ).
This new impulse curve is basically the new locus regarding activities in which, because of the demand contour in the business and you will given the wide variety of your own opponent, for each and every duopolist finds out the perfect number to create.
The curve of reaction for A ( Fig. 6.12-6 ) will be denoted by rA, and it is analytically determined taking the derivative of ?A(YA, YB) with respect to YA and setting it equal to zero, as follows :
The clear answer from the system ( Y An effective ? , Y B ? ) is the Cournot Harmony and is also portrayed by pursuing the quantities:
Figure 6.12-8 . Reaction curves for A and B and Cournot equilibrium at YA? = YB? = 100/3 with a = 100.
therefore the rate at which new people have a tendency to buy so it wide variety is set via the sector request p(Y) = a?Y as:
On the design, we could along with replicate various balance circumstances from the altering the new parameter a in the market request (get a hold of Fig. six.12-8 and you can six.12-nine ).
Figure 6.12-9 . Reaction curves for A and B and Cournot equilibrium at YA? = YB? = 70/3 with a = 70.
Let’s consider the point P out of Fig
A new way the fresh new response contour is recognized as by duopolist on the Cournot design lead to the Stackelberg design in addition to Stackelberg Harmony.
If in case no can cost you and seeking within finances having An effective (generally referred as chief business), this is accomplished merely plugging brand new reaction bend out-of B (generally speaking introduced as the lover providers), Y B = ( a ? Y A great ) dos , on cash form to have Good:
Graphs from Fig
The latest oligopoly features drawn the eye of many article-Keynesian economists regarding the 20th millennium, as far as the formation of pricing is worried, causing the newest article-Keynesian theory of the enterprise.
An essential browse because of the R. Hall and you will C. Hitch composed for the 1939 into the “Oxford Financial Papers,” called Rate Theory and you can Team Conclusion, aimed at examining the new costs choice processes during the enterprises, learned that the new cost of your own enterprises didn’t proceed with the marginalist increasing legislation, but alternatively a complete-prices rates laws.
The newest rates laws when you look at the oligopolistic areas showcased the essential difference between brand new neoclassical means and blog post-Keynesian economists. The latest oligopoly was a fix-rates field (while the outlined of the John Hicks), because the brand new costs laws generally speaking used is the complete-prices rates:
where ULC is the tool price of direct labor, UMC ‘s the tool price of garbage, and you may meters is the mark-upwards applied to the fresh head can cost you, to purchase standard costs and to ensure the needed remuneration of your own invested resource (we.elizabeth., WACC).