how does the model illustrate oligopolistic interdependence

Expert Solution

It is the kinked demand curve model of oligopoly market , that illustrates the oligopolistic interdependence among the firms. As per this model, when one firm decreases the price, then all other firms decrease the price. It means that no firm gain the advantage of decrease in price and there market share remains same. But, when one firm increases the price, then no other firms respond and they do not increases the price. It makes firm to be in losses that has increased the price. So, one firm is depending upon the others and vice versa, creating interdependence in oligopolistic market.

Besides, the model explains that there is a kink in the firm level demand curve. Above the kink in the demand curve, demand is more elastic in nature, making firm not to increase the price. But, below the kink, demand is less elastic, so there is no benefit to decrease the price. Hence, firm has to be dependent upon other firms as far as pricing strategy is concerned.

Rahul Sunny answered 9 months ago

What is the Capital Asset Pricing Model (CAPM) and how does the security market line illustrate how this model works?

What does Schelling mean by the interdependence of commitments? What does it tell us about how...

What does Schelling mean by the interdependence of commitments? What does it tell us about how we should conduct foreign policy?

Using game theory, explain and illustrate how an oligopolistic market differs itself from perfect competition.

What is the Capital Asset Pricing Model (CAPM) and how does the security market line illustrate...

What is the Capital Asset Pricing Model (CAPM) and how does the security market line illustrate how this model works?

What is the Capital Asset Pricing Model (CAPM) and how does the security market line illustrate...

What is the Capital Asset Pricing Model (CAPM) and how does the security market line illustrate how this model works?

What happens when a country specializes and how does it lead to interdependence and trade? Provide...

What happens when a country specializes and how does it lead to interdependence and trade? Provide an example of a country and a product or service where the country has grown because of their decision to embrace specialization.

How to illustrate the biological model (Schaefer model) that represents the relationship between the growth of...

How to illustrate the biological model (Schaefer model) that represents the relationship between the growth of the fish population and the size of the fish population on the graph? What’s the static efficient sustainable yield?

1) a) Use the IS/LM model and the FOREX market to illustrate how a decrease in...

1) a) Use the IS/LM model and the FOREX market to illustrate how a decrease in the U.S. money supply affects its own output and its exchange rate with the EU in the short run. b) discuss how expected exchange rates change to illustrate the long run effects of a permanent money supply reduction on the exchange rates.

Question 1 The behavior of oligopolistic firms is interdependent. One way of demonstrating how oligopolistic firms...

Question 1 The behavior of oligopolistic firms is interdependent. One way of demonstrating how oligopolistic firms may behave is chaos theory /game theory, which shows that most cartel agreements maybe __________________________ as firms have incentive to _____________________________. Question 2 The intent of anti-trust legislation is to promote _______________________________ and prevent formation of ___________________________________. Some examples of anti-trust laws are _________________________________________________.

3. Use the supply and demand model to illustrate how each of the following affects the...

3. Use the supply and demand model to illustrate how each of the following affects the market for cocoa beans, ceteris paribus. a. A blight on cacao trees kills of much of the crop in Latin America. b. The price of carob increases. c. Workers organize into a union and get higher wages for farming Cocoa. d. Chocolate is clinically proven to prevent Alzheimer’s disease. e. The price cocoa beans are expected to drop in the near future.

Question

how does the model illustrate oligopolistic interdependence

Solutions

Expert Solution

Related Solutions

What is the Capital Asset Pricing Model (CAPM) and how does the security market line illustrate how this model works?

What does Schelling mean by the interdependence of commitments? What does it tell us about how...

Using game theory, explain and illustrate how an oligopolistic market differs itself from perfect competition.

What is the Capital Asset Pricing Model (CAPM) and how does the security market line illustrate...

What is the Capital Asset Pricing Model (CAPM) and how does the security market line illustrate...

What happens when a country specializes and how does it lead to interdependence and trade? Provide...

How to illustrate the biological model (Schaefer model) that represents the relationship between the growth of...

1) a) Use the IS/LM model and the FOREX market to illustrate how a decrease in...

Question 1 The behavior of oligopolistic firms is interdependent. One way of demonstrating how oligopolistic firms...

3. Use the supply and demand model to illustrate how each of the following affects the...