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For a duopoly involving homogeneous products, explain and contrast a Cournot, Stackelberg and Bertrand equilibrium.
The critical problem faced by a firm in an oligopoly is that its decisions affect the prices and quantities of its rivals. The oligopoly problem arises because, where there are only a few suppliers to the market; the demand for the product of one firm depends significantly on the price and output. A non-cooperative duopoly is an industry consisting of two firms in which firms take their decisions independently and can be classified according to whether firms treat quantity or price as the key strategic variable. When it comes to quantity setting there are two major models put forward. The…
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