Critically discuss the view that the Cournot, Bertrand and Stackelberg models of oligopoly are fundamentally flawed and are unable to explain recent events in the
markets and industries.
1. Introduction – 150 words
2. Theory – 600 words
3. Analysis and empirical examples – 600 words
4. Conclusion – 150 words
Detailed structure:
Cournot oligopoly – explain and present the model with mathematical equations and graphs
1. Main assumptions
2. Cournot equilibrium (Nash)
3. Implications of Cournot’s assumptions
4. Reaction curves approach – “Iso – profit curves” – present with graph
5. Limitations of the model
6. Empirical example
Bertrand’s Model – “Buyer’s perspective”
1. Assumptions
2. Bertrand equilibrium
3. Iso – profit locus: Bertrand’s Model – explanation + graph
4. Implications of the model
5. Limitations
6. Bertrand’s equilibrium with differentiated products
7. Example
Stackelberg’s models – “Price leadership”
1. Stackelberg’s model: Leader’s demand curve;
2. Present the model with equations and graph
3. Present Stackelberg’s equilibrium + graph
4. Limitations of the model: Stackelberg games
5. Example
Compare the three non-collusive models: Bertrand, Cournot and Stackelberg
The essay should be an analytical answer to the topic.
Example references:
Giocoli, N. (2004), “Nash equilibrium”, History of political economy, 36 (4): 639-666
Dimand, R. W. and Dore, M. H. I. (1999), “Cournot, Bertrand and Game Theory: A further note”, American Economic Journal, 27 (3): 325-33
Estrin, Dietrich and Laidler (2012), Microeconomics – Chapters 13 and 15
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