Oligopoly

Discussion of how to set up and solve Stackelberg, Cournot, and Bertrand oligopoly models.

[@KiraAnandita]

You are amazing! Super helpful. Thank you so much for this! Your videos help me so much for my course.

[@KatherineSilzCarson]

Thank you for watching Kirana!

[@vaibhavverma9151]

You have a way of explaining things that no one else has. It's just soo amazing. You make things sooo easy! Thanks alot for making these videos. :D

[@KatherineSilzCarson]

Thank you for watching!

[@zeinaaboulaban6033]

This is a fantastic explanation! Thank you so much! :)

[@KatherineSilzCarson]

Zeina, I am glad that you found it to be helpful. Thank you for watching!

[@KimJollyNoWorries]

Thank you so much! It’s so so helpful

[@KatherineSilzCarson]

You're welcome! Thank you for watching!

[@amandaz1454]

why all my professors just don't know how to explain? like fr, why are they even professors this video sums up TWO chapters of textbook prescribed reading + three hours of lectures

[@KatherineSilzCarson]

I am glad that you found this video to be helpful! Thank you for watching!

[@michaelogbuigwe7055]

Wonderful!!!!!!

[@KatherineSilzCarson]

Thank you for watching!

[@bikilatolasa866]

ways of you teaching is good

[@KatherineSilzCarson]

Thank you for watching!

[@bikilatolasa866]

I really enjoy you thank you very much. instructor katherine silz-carson please try to send some topic for me wich regarding with Microeconomics part two and other economics materials

[@KatherineSilzCarson]

Bikila - depending on how your course is structured there should be videos for other topics in Microeconomics part two on this channel. If you have other suggestions, I am always open to them. Thank you for watching!

[@zerohero109]

God bless u

[@KatherineSilzCarson]

Thank you for watching!

[@sudaikematsu5890]

Hi, Katherine. May I know why the ideal efficiency case has the property that price equals marginal cost? Thank you.

[@KatherineSilzCarson]

Thank you for your question. The basic intuition is that at the point where price equals marginal cost, the cost of the last unit produced just equals the benefit of the last unit consumed. If price is greater than marginal cost, there are additional benefits to be gained, and we should produce more. If price is less than marginal cost, then the costs are greater than the benefits and we are producing too much. So the point where the price just equals marginal cost is the sweet spot. Hope this helps!

[@sofiazaiafarova8303]

Hi! Sorry, in the Stackelberg Price Leadership I don't understand what exactly D means. Is it for "demand"? Or is it an arbitrary variable? What it could depend on and where it usually comes from?

[@KatherineSilzCarson]

Hi Sofia - thank you for your question. D is simply a constant in firm 2's cost function. It can be any positive number. Hope this helps. Thank you for watching!

[@husseinnoor3430]

Amazing work but how about the additions of graphs it will be super helpful if its possible

[@KatherineSilzCarson]

Thank you Hussein for your suggestion. For Oligopoly models, since there are usually only 2 firms, the only graph one could create would be graphs of the best reply functions, which describe each firm's optimal quantity or price in response to the other firm's quantity/price. As is usually the case in economics, the sweet spot (in this case Nash equilibrium) happens where the two lines cross. I will consider incorporating your suggestion the next time I update the video. Thank you for watching!

[@BLINKBOXHD]

Hello, is there a method that you can find the output for profit maximizing using MR?

[@KatherineSilzCarson]

In Cournot and Stackelberg quantity, set MR = MC for each firm, and solve for the price. In a price selection model, use the demand curve to solve for quantities once you've got the prices. Hope this helps. Thank you for watching!

[@BLINKBOXHD]

thank you, your videos are great

[@nourinr417]

Hello great video maam. I have a question. Which is the preferred market mechanism, price or quantity leadership? Oligopoly and as role of a follower. TIA

[@nourinr417]

And why.

[@KatherineSilzCarson]

I think that firms would definitely rather be leaders than followers, regardless of whether they're leading on price or quantity. To figure out whether price or quantity is preferred, compare their profits in the two cases. Whichever one gives bigger profits is the one they'd prefer. Hope this helps! Thank you for watching!

[@nourinr417]

Heyy! Thanks so much for replying 💗 I'm really weak in econ. So I'm a bit confused. Does your answer above answer this question "Suppose your role in an oligopolistic market is of a follower. How would you determine your price and/or quantity? What would you prefer as the market mechanism, price leadership or quantity leadership? Why? Explain."

[@KatherineSilzCarson]

@@nourinr417 In part, it describes how to answer the question. To determine how you'd determine your price and/or quantity as a follower, follow the steps in the video for what the second mover would do to maximize profits, given what the first mover does (since the second mover knows the first mover's choice of price or quantity). To figure out which the follower likes better, calculate profits from price leadership vs. quantity leadership, and determine which is bigger. Whichever one gives the bigger profits is the one the firm would like better. Hope this helps!

[@yuukilee3632]

why do we look at firm2's function first before firm 1?

[@KatherineSilzCarson]

Great question, Yuuki. The reason why we look at firm 2 first is that because firm 1 needs to think about what firm 2 will do in response to firm 1's decision. So, we are putting ourselves in the position of Firm 1 asking, what is firm 2 going to do in response to our choice?

[@yuukilee3632]

Thank you so much for replying! Going to have presentation on this next week, and this video is very helpful !! Thank you for sharing !!!

[@KatherineSilzCarson]

You're welcome. Thank you for watching. Good luck with your presentation.

[@jordanfadness8832]

What do A and B signify?

[@KatherineSilzCarson]

A and B are just constants in the inverse demand function. A is the intercept, and B is the slope. Hope this helps.

[@FrancescaRamone]

GODDESS

[@KatherineSilzCarson]

Thank you for watching, Francesca!

[@mbayediop1094]

What is the difference between a Cournot model and a Bertrand model? and Which model is a more realistic depiction of oligopoly?

[@KatherineSilzCarson]

Thank you for your question, Mbaye. In a Cournot model, the firms choose quantities. In a Bertrand model, they choose prices. Which model is more realistic depends on the market. For example, OPEC chooses quantities, but lots of other firms (like airlines) choose prices. So, as is often the case in economics, the answer to your question about which one is more realistic is, "It depends..." Thank you for watching!

[@a2zknowledgetv195]

at 13:11; P(Q) = A-BQ

[@henryleow5605]

There is an error on 13.10 where should be p(Q)=A-BQ

[@KatherineSilzCarson]

Yes, thank you for catching that.