Indicate whether each statement below is true or false, and justify your answer. (a) [8 marks]...

Indicate whether each statement below is true or false, and justify your answer.

(a) [8 marks] The Cournot oligopoly model is not useful for analysing competition among firms because (i) firms normally choose prices, not quantities, and (ii) firms normally do not make their decisions simultaneously.

(b) [9 marks] Entry deterrence and entry accommodation call for the same strategy when the firms’ actions (e.g. setting price or setting quantity) are strategic substitutes and for opposing strategies when the firms’ actions are strategic complements.

Solutions

Expert Solution

False . . In such type of imperfect competition firms normally choose quantity over Prices as they are competing on the amount of output or product(homogenous ) and quantities which they are producing decided by them simultaneously.so demand is main deciding factor of the Prices .

False. . Firms make decisions at the same time and independently about quantities of homogenous products they are producing.

True ,true . Same strategy when there action are strategic substitute and opposing strategy when they are strategic complement.

When strategic substitute then top dog(hard) nd lean and hungry (soft) strategy for both entry deterrence and accommodation.

While strategic complement have (top dog (deterrence),puppy dog(accommodation) for toough strategy and lean and hungry (deterrence) ,fat cat( accommodation) as soft strategy.

True

Prices competition is less intense in more concentrate industrial regionsregions, because top firms are influence the market competition and other are not . If it more competition then industries are not Concentrate but disperse as as they are price taker and still have enough demand at any location nearby.

Rahul Sunny answered 1 year ago

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