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Oligopoly Model

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When one automaker begins offering low cost financing or rebates, others tend to do the same. What two oligopoly models might offer an explanation of this behavior?

my answer: I think the two types of oligopoly models are the Game theory model and Kinked Demand Curve. Because we know their will always be a demand for cars, but most consumers are looking to buy cars on a budget. These models apply.

Is this a correct assumption?

Thank you for any assistance.

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Your answer is not correct because "Game theory" and "Kinked Demand Curve" are not models of oligopoly.

The correct answers are Bertrand Model and Cournot models.

Bertrand model describes interactions among firms (sellers) that set prices and their customers (buyers) that choose quantities at that price. Here automaker A offers lower prices (so A is competing by setting low prices), and this means that all consumers would choose A's products over the rest (assume all products are ...

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See Also This Related BrainMass Solution

Kinked demand curve and Price Leadership are exemplified.
1.
Scenario BB:
ABC Inc.
Offer Rebate No Rebate
XYZ Corp Offer Rebate 20, 10 30, 0
No Rebate 12, 16 20, 4

Which of the following is true about the game in Scenario BB?
ABC's dominant strategy is to offer a rebate.
ABC's dominant strategy is not offer a rebate.
XYZ's dominant strategy is to offer a rebate.
XYZ's dominant strategy is not offer a rebate.
Both ABC and XYZ have offer a rebate as a dominant strategy

2. When one automaker begins offering low cost financing or rebates, others tend to do the same. What oligopoly model (s) might offer an explanation for this behavior?

1.
Scenario BB:
ABC Inc.
Offer Rebate No Rebate
XYZ Corp Offer Rebate 20, 10 30, 0
No Rebate 12, 16 20, 4

Which of the following is true about the game in Scenario BB?
ABC's dominant strategy is to offer a rebate.
ABC's dominant strategy is not offer a rebate.
XYZ's dominant strategy is to offer a rebate.
XYZ's dominant strategy is not offer a rebate.
Both ABC and XYZ have offer a rebate as a dominant strategy

2. When one automaker begins offering low cost financing or rebates, others tend to do the same. What oligopoly model (s) might offer an explanation for this behavior?
Kinked demand curve
Price Leadersip
Cartel
Prisonerâ??s Dilemma
a and b
None of the above

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