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Oligopoly Model

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.

Solution Preview

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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