TYBA ECONOMICS 2022-23

SEMESTER 5

MICROECONOMICS

Models of Oligopoly
GROUP NUMBER 03
 Group Members and Subtopics
Sr.No Name Div/ Roll Subtopics
No
01 Sarika Mandar Desai A002 Chamberlin’s Model

02 Isha Jadhav A007

03 Kanak Trigunesh Joshi A012 Edgeworth’s Duopoly Model

04 Hrimaaditi Khanal A013

05 Esha Mungi A018 Cournot’s Duopoly Model

06 Aashka Vadodaria A026 Collusive Oligopoly: Cartels

 What is Oligopoly ?
• An oligopoly is a market structure with a small number of firms, none of
which can keep the others from having significant influence. The concentration
ratio measures the market share of the largest firms.

• Oligopolies in history include steel manufacturers, oil companies, railroads, tire

manufacturing, grocery store chains, and wireless carriers. The economic and
legal concern is that an oligopoly can block new entrants, slow innovation, and
increase prices, all of which harm consumers.

• Firms in an oligopoly set prices, whether collectively—in a cartel—or under the

leadership of one firm, rather than taking prices from the market. Profit margins
are thus higher than they would be in a more competitive market. 

Esha Mungi, A018

 Cournot’s Duopoly Model
Assumptions to the model

• Homogenous products
• No cost of production (MC=0)
• Duopolist fully knows the market demand
• Duopolist believes that regardless of any effect upon market price of the commodity,
the rival keeps the output constant.

Esha Mungi, A018

Cournot’s Duopoly Model

K
Price

F S
P”
L
p’
G

o
output M T N D
MRa MRb

Esha Mungi, A018

 Edgeworth’s Duopoly Model
Assumptions to the model:

 Homogeneous products
 Equally divided market
 Duopolist assumes that his rival will keep the price constant

~ Kanak Joshi, A012

Edgeworth’s Duopoly Model
D
Producer 2 Producer 1

Price
E’ P E

R S
S’ R’

T’ T
Q

C’ B’ A’ O A B C
Output

~ Kanak Joshi, A012

 Chamberlin’s Model
Assumptions to the model:

 Duopoly
 Homogenous product
 MC=0
 Duopolist fully knows the market demand curve
 Realization of mutual dependence

~ Sarika Mandar Desai, A002

 Y
M Chamberlin’s Model
OQ= OH of A + QL of B

Price
E
P

K
P’

O X
H Q L D
Output MR1 MR2

~ Sarika Mandar Desai, A002

 Collusive Oligopoly:Cartels
• In a Cartel way of Oligopoly, firms altogether arrive at a fixed price and output policy through agreements.
• The agreements are generally tacit or a secret.
• Formerly, Cartels were common sales agencies.
• Now, any type of tacit agreement is a cartel.
• There are two types of cartels Perfect and Price-Sharing Cartels

Name and Roll No

 Price and Output Determination of Perfect
Y
Cartels D
MCₐ ACₐ MCb ACb
F P E L MCc
P P
G
Price

K H
T
D

MR

O X
Q1 O Q2 O Q
Output
Name and Roll No
 Price Leadership
Y
D
ACb
H ACa
MCb
p
D
price MBa
Market
E d demand

MR
O
x
N M Q
output
HRIMAADITI
KHANNAL 13
 Price Leadership
Y Y
D S

R AC
P1
Price and cost

Price and cost

P S H
C T P MC
P2 P2 Z
G
K
E
P3 U dl
D MRl
O X O X
quantity Q
(a) (b) output

HRIMAADITI
KHANNAL 13
 Kinked Demand Curve
Y

k
PRICE

O M X
QUANTITY
 Kinked Demand Curve
Y
Y
d

MC’ K K’
K P
Price and cost

P MC

Price and cost

H
E’ H H’
D D’
E D
AR

R R’

O X O X
output M R output M M’
MR MR’
MR
THANK YOU !