What is the Edgeworth duopoly model?

The Edgeworth Duopoly Model, developed by Francis Ysidro Edgeworth, allows two firms to compete not just in terms of price or quantity, but both. Unlike other duopoly models, this one assumes non-linear demand where firms can adjust both the price and output.

What is the Edgeworth model of duopoly?

The Edgeworth duopoly model, also known as Edgeworth solution, was developed by Francis Y. Edgeworth in his work “The Pure Theory of Monopoly”, 1897. It is a duopoly model similar to the duopoly model developed by Joseph Bertrand, in which two firms producing the same good compete in terms of prices.

What is the difference between Bertrand and Edgeworth model?

Unlike in the standard Bertrand competition model, where firms are assumed to meet all demand at their chosen price, the Bertrand–Edgeworth model assumes each firm has a capacity constraint: a fixed maximum output it can sell, regardless of price.

What is the duopoly model of economics?

A duopoly (from Greek δύο, duo 'two'; and πωλεῖν, polein 'to sell') is a type of oligopoly where two firms have dominant or exclusive control over a market, and most (if not all) of the competition within that market occurs directly between them.

What is the Edgeworth model graph?

In economics, an Edgeworth box, sometimes referred to as an Edgeworth-Bowley box, is a graphical representation of a market with just two commodities, X and Y, and two consumers. The dimensions of the box are the total quantities Ω_x and Ω_y of the two goods.

Edgeworth Duopoly Model

What is the Edgeworth theorem?

Edgeworth's limit theorem is an economic theorem, named after Francis Ysidro Edgeworth, stating that the core of an economy shrinks to the set of Walrasian equilibria as the number of agents increases to infinity.

What are the criticism of Edgeworth's duopoly model?

Edgeworth's criticism of Cournot's duopoly model focused on: the unrealistic assumption of constant marginal cost. the neglect of production capacity constraints. the assumption of identical products offered by the duopolists.

What is duopoly in simple words?

A duopoly is a market structure in which only two firms or producers control all or most of the market share. The word duopoly comes from the Greek words for ''two'' and ''to sell. '' In other words, it is a situation where two companies that are producers/sellers dominate an industry or sector.

Is Coca-Cola and Pepsi a duopoly?

There are plenty of examples of duopolies in today's markets—Coca-Cola and Pepsi in the soda industry and Apple and Samsung in the smartphone industry are two of them.

What is the duopoly rule?

Currently, an entity is permitted to own up to two television stations in the same media market if either the service areas of the stations do not overlap, or at least one of the stations is not rated among the top four rated stations in the media market.

What does the Chamberlin and Edgeworth duopoly model assume?

Chamberlin's Duopoly Model- A Small Group Model:

In other words, his model is also based on the assumption of homogeneous products, firms of equal size with identical costs, no entry by new firms and full knowledge of demand.

What is the Bertrand model of duopoly?

In the Bertrand Duopoly, two firms, Firm A and Firm B, sell identical products (e.g., smartphones) and engage in a price war to attract customers. Here's how it plays out: Price Competition: Consumers always buy from the firm with the lower price.

What are the assumptions of a duopoly?

Duopoly Models in Economic Theory

Assumptions: Firms choose quantities simultaneously. Each firm assumes the rival's output remains fixed. Equilibrium: Occurs when neither firm wants to change its quantity, given the other's output – called Cournot-Nash Equilibrium.

What is the Stackelberg model?

Stackelberg competition describes an oligopoly market model based on a non-cooperative strategic game where one firm (the “leader”) moves first and decides how much to produce, while all other firms (the “followers”) decide how much to produce afterwards.

What is the Mundell Fleming model of economics?

Under the Mundell–Fleming framework of a small economy facing perfect capital mobility, the domestic interest rate is fixed and equilibrium in both markets can only be maintained by adjustments of the nominal exchange rate or the money supply (by international funds flows).

What is the Edgeworth index?

Marshall-Edgeworth index

It uses a simple arithmetic mean of base and current quantities, making it symmetric and intuitive. However, its use can be problematic when comparing entities of vastly different scales (e.g., a large country's quantities overshadowing a small one's in international comparisons).

Are duopoly and oligopoly the same?

A duopoly is a subset of an oligopoly where only two independent sellers exist. These sellers can act independently or consider the influence of their actions on each other.

What is Cournot's model of duopoly?

The model involves the firms reacting to each other's output and price decisions in successive rounds until they split the market evenly. Some criticisms of the model are that it assumes costless production and does not allow for new firm entry or learning over time.

Is soft drink an oligopoly?

Market Type

Both companies, by definition, are located in an oligopoly-type market situation in which the number of sellers is minimal so that they control and monopolize the sales of Cola soft drinks as if there were a monopoly.

Is a duopoly better than a monopoly?

Why are duopolies assumed to be more competitive than monopolies? Duopolies involve two dominant firms that are competing for market share through product quality, innovation, and pricing. This competition can lead to lower prices and higher-quality products, ultimately resulting in increased consumer surplus.

Who introduced duopoly?

The first mathematical economic model of oligopoly (in the form of a duopoly) was developed by the French mathematician and economist Augustin Cournot in 1838 (Researches into the Mathematical Principles of Wealth, Chapter 7).

What is an example of a monopsony?

The job market is a common monopsony in areas that have few places to work with many workers needing jobs. Farmers selling their produce to a single (or few) buying market is another common example of monopsony. Finally, the U.S. government is often a monopsony in terms of having multiple suppliers bid for projects.

What is an example of the Edgeworth model?

Example. Suppose two companies, A and B, sell an identical commodity product, and that customers choose the product solely on the basis of price. Each company faces capacity constraints, in that on its own it cannot satisfy demand at its zero-profit price, but together they can more than satisfy such demand.

What are the assumptions of the Edgeworth duopoly model?

The analysis begins with a reformulation and'extension of the pure Edgeworth model of duopoly, which assumes identical products, price strategy, short tern profit maximization, and the firms' failure to recognize their mutual dependence. Price instability is the general rule in this model.

What are the five characteristics of an oligopoly?