Bertrand Competition Is More Intense Than Cournot Competition

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Research Paper Bertrand Competition is More Intense Than Cournot Competition Submitted by Janice Calice Prepared for Dr. John Machnic, PhD. BUSN 6120, Managerial Economics Summer 1, 2013 Section OB Webster University July 24, 2013 CERTIFICATE OF AUTHORSHIP: I certify that I am the author. I have cited all sources from which I used data, ideas, or words, either quoted directly or paraphrased. I also certify that this paper was prepared by me specifically for this course. Janice Calice 7/24/ 2013 ______________________________ Signature Date Table of Contents I. Introduction II. The Bertrand model of Oligopoly III. The Cournot Model IV. Bertrand versus Cournot V. Conclusion VI. References Introduction In the model of monopoly one seller confronts a large number of buyers. The key to analysing this situation is to understand the information that the monopolist has about the buyers, which determines to what degree the monopolist can exploit his potential bargaining power. But if there are a small number of sellers who interact in a market the analysis of individual firm and the equilibrium outcome becomes more complicated. The profit outcome for each firm depends not only on its own decisions concerning price and quantity, but on the decisions of its competitors. The investigation of oligopolistic markets is central in economics. The Cournot and Bertrand models of oligopoly share several important features that distinguish them from the bulk of other models of imperfect competition. The aim of this paper is to compare those two models of oligopoly, and particularly explain the case when number of Cournot competitors increases and compare its outcome with Bertrand model. Firstly, the paper will be giving the explanation of the basic Bertrand model and Cournot model

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