Duopoly is ... Models of Cournot, Stackelberg, Bertrand

структура рынка, при которой два субъекта, защищенные от появления других продавцов, выступают в качестве единственных производителей стандартизированной продукции, не имеющей близких заменителей. Duopoly is a market structure in which two entities protected from the appearance of other sellers act as the sole producers of standardized products that do not have close substitutes. Let us consider this model in more detail.

Duopoly: the meaning

This structure allows to illustrate the impact of the proposals of an individual seller on an equilibrium release in relation to the competitor's answer. This model was proposed by the French scientist Cournot. представляет собой следующую схему. Duopoly in the economy is the following scheme. Each of the two entities assumes that the competitor will keep his output at the current level unchanged.

Duopoly: what is it?

Consider how the circuit works. Duopoly is a model that is based on 2 assumptions about the behavior of the enterprise. First of all, each company is focused on maximizing profits. At the same time, the firm believes that if it changes its output, another organization will keep its own at the current level. In such conditions, equilibrium in the market is achieved by the following method. Let's say that there are sellers A and B in the region. They sell the identical goods. For other entities, entry to the market is closed. Suppose the enterprise A starts to produce the goods first. It captures the whole market and suggests that there will be no competitors on it. In this situation, the company behaves like a monopolist. However, immediately after the start of production, enterprise B appears on the market. It believes that company A will not change the volume of output that has been achieved. Company B will increase the offer. This, in turn, will provoke a reduction in the price of products. Enterprise B will periodically increase the volume, and firm A - reduce. The final equilibrium output for each company will reach 1/3, and the total production volume is 2/3 of the competitive.

conclusions

такая ситуация, при которой одна из фирм выбирает объем выпуска, максимизирующий ее доход. From the above description it is clear that a duopoly is a situation in which one of the firms chooses the volume of output that maximizes its income. After that, the second enterprise, believing that the level of production will be unchanged, establishes its own, aimed at getting as much profit as possible. This process proceeds in stages until the companies achieve equilibrium.

Specificity

Duopoly is a non-cooperative equilibrium. Each enterprise makes decisions that assume the maximum possible revenue for certain actions of competitors. Equilibrium can be represented using response curves. The line shows the maximizing volumes of production that will be realized by one company if the level of the other firm is known. The basic model predicts a tendency to reduce the price to marginal costs as the number of sellers increases. The addition of probable changes will rank oligopolistic models of value formation from competitive to monopolistic ones.

Stackelberg scheme

This model is a development of the structure of Cournot. The scheme added asymmetric behavior of enterprises. In other words, it is assumed that one of the firms will behave aggressively, that is, become a leader. Another enterprise will be a follower (passive behavior). The leader chooses the volume of production first. He will maximize profit taking into account the release that the follower will implement. The first enterprise believes that the second firm also wants to receive a high income, but with an existing offer. This allows the leader to accurately predict the volumes of the release of the follower. This market interaction has the character of quantitative (non-price) discrimination from the active firm. The key to this is the "first move" - the choice of the volume of production and, accordingly, the value of the product.

Alternative option

The advantage of the Stackelberg scheme is that companies compete in quantitative terms. Meanwhile, in reality, firms are trying to fight at prices. These considerations raise doubts in the results of the implementation of the equilibrium volume model. The French economist Bertrand criticized Cournot's structure. He proposed an alternative, which is based on the following assumptions. If companies sell homogeneous products, then consumers will buy it from the company that sets a lower cost. In addition, enterprises determine prices, and the market - the volume of output. In accordance with the model, each company sets a value that maximizes profits. At the same time, she believes that the price of the competitor's goods will remain unchanged. It is due to this that the market moves to an equilibrium state, in which no enterprise wants to adjust the value of the product.