Which of the following oligopoly models has an equilibrium that can be described as a Nash equilibrium?
A)Cournot oligopoly model
B)Dominant firm and competitive fringe oligopoly model
C)Bertrand oligopoly model
D)Kinked-demand oligopoly model

Question

Quizplus · Accepted Answer

In the Cournot oligopoly model, each firm chooses its output level, given the output level of the other firms. The equilibrium output level for each firm is where their best response function intersects with the best response functions of the other firms. This intersection point is a Nash equilibrium, where no firm can increase its profit by unilaterally deviating from its chosen output level. In contrast, the other models may have equilibria that are not Nash equilibria. For example, in the Bertrand model, firms may engage in a price war and end up with prices equal to the marginal cost, which is not a Nash equilibrium.

Which of the Following Oligopoly Models Has an Equilibrium That