Question

What are the main features of the Cournot competition model and the Betrand competition model, respectively? Given examples of industries in our
real life that are suitable to fit Cournot competition and Betrand competition, respectively, and explain why.

Answer 1

Cournot competition explains how in a market, firms in an industry compete against each other on the basis of the output they both produce. The output produced by the firms are not dependent on each other output price, quality or type. It is completely independent to both, and they decide the output on the basis of their own factors of production, market equilibrium and its own assessment of the market conditions. In a Cournot competition, the firms compete on the basis of their capital ingestion in to the production process, and on how much they can win the consumers trust to maximize the profit.

An example of Cournot competition is the market structure where PepsiCo and CocaCola compete against each other. Both the competitors operate in the same market; however, they do not decide the prices, output, or other factors depending on the market decisions of the other firm. They decide the output independently and attract their consumers to the best of their ability.   

                                       Bertrand competition on the contrary also explains how in a market, firms in an industry compete against each other on the basis of the output they both produce. But, the output produced by the firms are completely dependent on each other’s output price, quality or type. It is completely dependent on both, and they decide the output on the basis of their interaction to set up the product output or prices of the product. They also determine what type of product is to be produced and the quality of the product. In a Bertrand competition, the firms compete on the basis of their mutual adjustment in the market, and feed of each other policy decisions.

                                      An example of Bertrand competition is the market structure where Cadbury and Nestle compete against each other. Both the competitors operate in the same market, and, they decide the prices, output, and other factors depending on the market decisions of the other firm. They decide the output dependently and attract their common consumers to the best of their ability, on the basis of the consumers taste, as here, the consumers is nearly indifferent to either of the products.