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Cournot and Bertrand Equilibria

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Cournot and Bertrand Equilibria and its relation to tough and soft Commitments.

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Solution Summary

The following posting helps with general equilibrium problems. Cournot and Bertrand Equilibria are emphasized.

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Please refer to the attachment.

In a two firm oligopoly (called a duopoly), each duopolist produces less than a monopolist in the same market but together they produce more than the monopolist and less than the amount two competitive firms would have produced with the same cost structure and demand curves. If the oligopoly is symmetric, that is, all firms have identical products and cost conditions, then the degree to which price exceeds marginal cost is inversely related to the number of firms.

If both firms set their output levels assuming that the other firm will act like a monopolist with the rest of the market, the outcome is called a Cournot equilibrium.
The Cournot Solution proposes that firms choose an output that will maximize profits assuming the output of rivals is fixed. The solution concludes that there is a ...

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