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3 edition of Stable prices, fluctuating demand, and inventory adjustments in oligopolistic industries. found in the catalog.

Stable prices, fluctuating demand, and inventory adjustments in oligopolistic industries.

Michael Spence

Stable prices, fluctuating demand, and inventory adjustments in oligopolistic industries.

by Michael Spence

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Published by Harvard Institute of Economic Research in Cambridge (Mass.) .
Written in English


Edition Notes

SeriesDiscussion paper / Harvard Institute of Economic Research -- no.463
ID Numbers
Open LibraryOL13836383M

Since antitrust policies prevent industries from legally colluding, most industries engage in tacit collusions by covertly keeping their prices above non-cooperative levels. b. Differences in interests amongst firms, or large number of firms in an industry, may be factors that inhibit industries from coordinating high prices. c. Zhang, D., and Nagurney, A., “Stability analysis of an adjustment process for oligopolistic market equilibrium modeled as a projected dynamical system,” Optimization 36 () – CrossRef Google ScholarCited by: 1.

  A Oligopolistic market is one that has a few firms dominating it When say dominating they all have a large market share and concentration ratio. E.g. A 5 firm conc ratio of 85% would mean they have 85% of the market shareHowever it is looked on that the conduct and behaviour of these firms shows their.   “Explain how a firm operating in an oligopolistic market might attempt to increase its market share. “Evaluate the view that producers, and not consumers, are the main beneficiaries of oligopolistic market structures.” Demands of the question 1. paper 1 2. 20 minutes 3. explain the ways it is possible to increase market share 4. show.

There are multiple models of pricing behavior in oligopolistic markets because. a. it is difficult to predict how rival firms will react to any pricing decision. b. price has a direct impact on profit for a firm in oligopoly. c. the demand curve slopes upward for these firms. d. the products are not identical in terms of quality, image. Remember that there are many different models that try to explain the behaviour of oligopolistic firms. This is the only diagrammatical one that you need to know for A level. Other features of oligopoly will be covered in the next sub-section. As mentioned previously, firms in oligopoly are interdependent. They monitor each other's actions closely because any action by one firm will .


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Stable prices, fluctuating demand, and inventory adjustments in oligopolistic industries by Michael Spence Download PDF EPUB FB2

An oligopoly firm's demand curve will be kinked if: its rival match price decreases but ignore price increases According to the kinked-demand model of oligopoly, if two or three firms ignore a price decrease by the third firm. Start studying Chapter Monopolistic Competition and Oligopoly.

Learn vocabulary, terms, and more with flashcards, games, and other study tools. Often prices appear to be relatively stable in oligopolistic markets. There are different models to explain periods of price stability.

The most predominant one being the kinked demand curve model, though this has received substantial criticism and economists have put forward other explanations.

Price stability in a non-collusive oligopoly can be explained by the kinked oligopoly diagram. The kink exists because demand is more elastic at higher prices in comparison to low prices where demand is inelastic. To help explain how prices tend to stay stable I will use an example using three firms: firm A, firm B, and firm C.

Question 14 of 19 / Points Prices in oligopolistic industries are predicted to fluctuate widely and frequently compared to other market structures. True B. False Answer Key: False Question 15 of 19 / Points The positive view of advertising suggests that it contributes to economic efficiency in the economy.

Stable prices is an (S,s) order policy and prices and inventory are strategic substitutes. Fixed ordering costs generate infrequent orders. Consequently, with strategic competition in prices, (S,s) inventory behavior together with demand uncertainty generates en-dogenous cyclical patterns in prices without any exogenous shocks.

Hence, the devel. an effective remedy for the problem of oligopolistic pricing. Chapter C discusses the two major suggestions for resolving the oligopolistic problem: Posner’s economic-evidence approach and the deconcentration approach, as well as each suggestion’s major weaknesses.

The Oligopoly Pricing Theories 1. The Basic Cournot ModelFile Size: KB. Oligopoly and inventory adjustments in oligopolistic industries.

book the least understood market structure; consequently, it has no single, unified theory. Nevertheless, there is some agreement as to what constitutes an oligopolistic market.

Three conditions for oligopoly have been identified. First, an oligopolistic market has only a. (10 pts.; 2 pts each) You are the manager for Dunkin Donuts and know the following elasticities: η= η I = η xy1 = η xy2 = η is the price elasticity of demand for Dunkin Donuts (DD) glazed doughnuts, η xy1 is the cross elasticity of demand between DD glazed doughnuts and Krispy Kreme (KK) glazed doughnuts, η xy2 is the cross elasticity of demand.

ADVERTISEMENTS: The Kinked Demand Curve Theory of Oligopoly. It has been observed that many oligopolistic industries exhibit an appreciable degree of price rigidity or stability. In other words, in many oligopolistic industries prices remain sticky or inflexible, that is, there is no tendency on the part of the oligopolists to change the price even if [ ].

The true demand curve for the oligopolistic market is dD and has the kink at the existing price P1. The demand curve has two linear curves, which are joined at price P. Associated with the kinked demand curve is a marginal revenue function.

This is shown in Figure. Marginal Revenue for prices above the kink is given by MR1 and below the kink. Hence, in a PC market, any change in demand or supply will cause a change in the market price, thus prices tend to fluctuate.

Prices in an oligopolistic firm. Prices fluctuate less in an oligopolistic market than in a perfectly competitive market due to the varying degree of barriers to entry in the respective market.

If marginal costs fall in the gap of the MR curve P* will remain the profit maximizing price and Q* will be the profit maximzing output. One of the points of the kinked demand curve model was that it provided an explanation for a behavior that economists were well aware of within oligopoly.

It had been observed that firms in oligopolistic industries didn't change price and output often. Econometrica, Vol. 56, No. 3 (May, ), Second, even in periods of technological and demand stability, oligopolistic markets are not always stable.

Prices may fluctuate, sometimes wildly. Of course, one reason for these discrepancies between File Size: KB. A Kinked Demand Curve theory was developed in of non-collusive oligopoly. This theory is used to explain price stability in an oligopolistic market.

The model developed by Paul Sweezy, R.L. Hall and C.J. Hitch seeks to explain how prices remain stable even when there is no collusion between oligopolies. PRICE DETERMINATION MODELS OF OLIGOPOLY: 1. Kinky Demand Curve: The kinky demand curve model tries to explain that in non-collusive oligopolistic industries there are not frequent changes in the market prices of the products.

The demand curve is drawn on the assumption that the kink in the curve is always at the ruling price. After all, we expect to see the prices of all firms in a perfectly competitive industry moving together in response to changes in demand or production costs.

Game Theory and Oligopoly Behavior Oligopoly presents a problem in which decision makers must select strategies by taking into account the responses of their rivals, which they cannot know. The above can be applied to each of the industries.

Let N be a diagonal matrix with the numbers of competitors in the various markets nsub>i on the principal diagonal Then column vectors P. A and C, for prices p i, the demand parameters a i, and marginal costs c i.

This bar-code number lets you verify that you're getting exactly the right version or edition of a book. The digit and digit formats both work. Scan an ISBN with your phone Use the Amazon App to scan ISBNs and compare prices. Have one to sell. Sell on Amazon Share. Hardcover.

$ Buy used. $ The kinked-demand curve analysis of oligopoly builds on the notion of interdependent decision-making to explain why prices tend to be relative stable or rigid. The key to this analysis is that competing firm s do not respond in the same way when one firm increases or decreases its price.

Multiple Choice Quiz. The market for automobiles is an example of. a. monopolistic competition. According to the kinked demand curve model, a firm will assume that rival firms will. a. have a positive effect on a country's industries. b. be accurately predicted.Kinked Demand Curve. crude oil prices fluctuating between $17 and $19 during most of the period.

20% price increase in nominal prices just to kept up with inflation. Prices were stable near $ per barrel from tobut actually crude oil price declined from above $19 to $14 per barrel. The decline in the price of crude when.Study 33 test #4 flashcards from Daniella M. on StudyBlue.

juicy counter has been selling women clothing using an unusual strategy. according to WSJ the key to the firms strategy is to limit distribution to maintain the brands exclusive cachet, even if that means sacrificing sales, a brand management technique once used only for high end luxury brands injuicy clothes were .