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HOOFDSTUK 12: OLIGOPOLIE

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Bij perfecte competitie (hoofdstuk 9) hebben we gezien dat een individueel bedrijf totaal geen
marktmacht vermits er veel aanbieders zijn met een identiek product. In de andere uiterste
marktvorm, namelijk monopolie, heeft de monopolist zeer veel marktmacht omdat hij de enige
aanbieder is. Naast zijn kosten, moet hij alleen rekening houden met de betalingsbereidheid van zijn
consumenten.
Maar er zijn nog andere marktvormen met marktmacht, ook al is die marktmacht beperkter dan bij
monopolie. In dit geval bevinden we ons op een imperfect competitieve markt, waarbij wij een
onderscheid kunnen maken tussen monopolistische concurrentie en oligopolie.
Bij monopolistische concurrentie probeert een aanbieder markmacht te bekomen door
productdifferentiatie, ook al zijn er veel aanbieder van een ongeveer gelijkaardig product.
Bij oligopolie is het aantal aanbieders beperkt. Dit geeft hen de macht om de prijs van hun product te
bepalen, zoals een monopolist. Maar een oligopolist moet naast de betalingsbereidheid van zijn
consumenten ook rekening houden met zijn concurrent(en). Hoe de oligopolisten dit doen, hangt af
van enkele zaken bvb. Wanneer betreden zij de markt? Bestaat er een mogelijkheid tot
samenwerken? Kunnen zij een verschillende prijs vragen voor hun product? …
Verschillende economen hebben verschillende theorieën ontwikkeld, die in de volgende oefeningen
gaan bekijken. In de oefeningen gaan we enkel in op oligopolie. Monopolistische concurrentie hoort
enkel bij de te kennen leerstof voor de theorie.
a. Cournot - Nash: Bedrijven reageren onafhankelijk, maar houden rekening met elkaar
b. Collusie: De bedrijven gaan samenwerken
c. Von Stackelberg: Eén bedrijf is leider en komt duidelijk als eerste op de markt
d. Prijsconcurrentie: Bertrand - Nash , Leider/volger,…
e. Dominant bedrijf: Eén duidelijke marktleider en enkele kleinere bedrijven.

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Overzicht oefeningen
Opdracht 12.1 Cournot en collusie
Opdracht 12.2 Uitbreiding op opdracht 12.1 (alleen HI)
Opdracht 12.3 Cournot en collusie (inzicht)
Opdracht 12.4 Cournot en collusie
Opdracht 12.5 Cournot inzicht (alleen HI)
Opdracht 12.6 Cournot, collusie en Von Stackelberg
Opdracht 12.7 Cournot, collusie en Von Stackelberg
Opdracht 12.8 Cournot (diverse kostenfuncties)
Opdracht 12.9 – 12.11* Prijscompetitie (* indien prijscompetitie besproken werd in theorie)
Opdracht 12.12 – 12.13 Dominant bedrijf

Opdracht 12.1

The market demand curve in a commodity chemical industry is given by P = 100 - 0,5Q, where Q is
the quantity demanded per month and P is the market price in dollars. Firms in this industry supply
quantities every month, and the resulting market price occurs at the point at which the quantity
demanded equals the total quantity supplied. Suppose there are two firms in this industry.
Firm 1 has a total cost TC1 = 5Q1 and firm 2 has a total cost TC2 = 0,5Q2².
1. Find the Cournot equilibrium price and quantities for each firm.
2. What would be the equilibrium price and quantity in this market if the two firms acted as a profit-
maximizing cartel? When is collusion possible?
3. How much is firm 1 willing to pay to purchase firm 2 if collusion is illegal but a takeover is not?
4. Is collusion the most likely output strategy?
Assume one firm can take a leader position. Determine the equilibrium quantities for each firm
and equilibrium price if: a. Firm 1 is the leader
b. Firm 2 is the leader
c. Both firms want to be the leader
Calculate and compare the profit of each firm under each situation.
When is the overall profit of the industry as much as possible?

Cournot q2

q1

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Collusie q2

q1

VOOR collusie
NA
Duopolist 1 1ste leider/
Cournot collusie
= monopolist 2de volger
q1

q2

П1

П2

Duopolist 2
Pay-off matrix winsten
Cournot Collusie

Cournot
Duopolist 1
Collusie

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Opdracht 12.2 (alleen HI)

What if firm 2 in ex. 12.1 aims for a market share of 1/3?

a. Find the profit under the Cournot equilibrium?
b. Find the profit if Firm 1 is the leader
c. Find the profit if Firm 2 is the leader

Opdracht 12.3

Consider two firms facing the demand curve P = 50 - 5Q, where Q = Q 1 + Q2.
The firms’ cost functions are TC1(Q1) = 20 + 10Q1 and TC2(Q2) = 10 + 12Q2.

a. Suppose both firms have entered the industry.

What is the joint profit-maximizing level of output?
How much will each firm produce?
How would your answer change if only one firm entered the industry?
b. What is each firm’s equilibrium output and profit if they behave non-cooperatively?
Use the Cournot model. Draw the firms’ reaction curves and show the equilibrium.
c. How much should Firm 1 be willing to pay to purchase Firm 2 if collusion is illegal but a takeover
is not?

Opdracht 12.4

Suppose that two identical firms produce widgets and that they are the only firms in the market.
Their costs are given by TC 1 = 60Q1 and TC2 = 60Q2, where Q1 is the output of Firm 1 and Q 2 the
output of Firm 2.
The price per unit (in $) is determined by the following demand curve: P = 300 – Q where Q = Q 1 +
Q2.

a. Find the Cournot-Nash equilibrium. Calculate the profit of each firm at this equilibrium.
b. Suppose the two firms form a cartel to maximize joint profits.
How many widgets will be produced? Calculate each firm’s profit.
c. Suppose Firm 1 is the only firm in the industry. How would market output and Firm 1’s profit
differs from that found in part b above?
d. Returning to the duopoly of part b, suppose Firm 1 abides by the agreement, but Firm 2 cheats
by increasing production. How many widgets will Firm 2 produce?
What will be each firm’s profits?

Opdracht 12.5 (alleen HI)

Two firms compete in selling identical widgets. They choose their output levels Q 1 and Q2
simultaneously and face the demand curve: P = 30 – Q
where Q = Q1 + Q2. Until recently, both firms had zero marginal costs. Recent environmental
regulations have increased Firm 2’s marginal cost to $15. Firm 1’s marginal cost remains constant at
zero.
True or false: As a result, the market price will rise to the monopoly level.

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Opdracht 12.6

Demand for light bulbs can be characterized by Q = 100 - P, where Q is in millions of boxes of lights
sold and P is the price per box (in $). There are two producers of lights, Everglow and Dimlit.

They have identical cost functions: TCi = 10 Qi + 0,5 Q²i (i = E, D) Q = QE + QD

a. Unable to recognize the potential for collusion, the two firms act as short-run perfect competitors.
What are the equilibrium values of QE, QD, and P? What are each firm’s profits?
b. Top management in both firms is replaced. Each new manager independently recognizes the
oligopolistic nature of the light bulb industry and plays Cournot.
What are the equilibrium values of QE, QD, and P? What are each firm’s profits?
c. Suppose the Everglow manager guesses correctly that Dimlit is playing Cournot, so Everglow
plays Stackelberg.
What are the equilibrium values of QE, QD, and P? What are each firm’s profits?
d. If the managers of the two companies collude, what are the equilibrium values of Q E, QD, and P?
What are each firm’s profits?

Opdracht 12.7

Two firms produce luxury sheepskin auto seat covers, Western Where (WW) and B.B.B. Sheep
(BBBS). Each firm has a cost function given by TC(Q) = 30Q + 1,5 Q²
The market demand for these seat covers is represented by the inverse demand equation:
P = 300 - 3Q, where Q = Q1 + Q2, total output.
a. If each firm acts to maximize its profits, taking its rival’s output as given (i.e., the firms behave
as Cournot oligopolists), what will be the equilibrium quantities selected by each firm?
What is total output, and what is the market price?
What are the profits for each firm?
b. It occurs to the managers of WW and BBBS that they could do a lot better by colluding.
If the two firms collude, determine:
- the profit-maximizing choice of output
- the industry price
- the output and the profit for each firm
c. The managers of these firms realize that explicit agreements to collude are illegal. Each firm must
decide on its own whether to produce the Cournot quantity or the cartel quantity. To aid the
manager of WW, in making the decision, construct a payoff matrix with the profits of WW and
BBBS.
Given this payoff matrix, what output strategy is each firm likely to pursue?
d. Suppose WW can set its output level before BBBS does.
How much will WW choose to produce in this case?
How much will BBBS produce?
What is the market price, and what is the profit for each firm?
Is WW better off by choosing its output first? Explain why or why not. (1 digit after the decimal
point to complete.)

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Opdracht 12.8

Suppose the airline industry consisted of only two firms: American and Texas Air Corp. Let the two
firms have identical cost functions, TC(Q) = 40Q.
The demand curve for the industry is P = 100 - Q and that each firm expects the other to behave as a
Cournot competitor.
a. Calculate the Cournot-Nash equilibrium for each firm, assuming that each chooses the output
level that maximizes its profits when taking its rival’s output as given.
What are the profits of each firm?
b. What would be the equilibrium quantity if Texas Air had constant marginal and average costs of
$25 and American had constant marginal and average costs of $40?
c. Assuming that both firms have the original cost function, TC(Q) = 40Q, how much should Texas
Air be willing to invest to lower its marginal cost from 40 to 25, assuming that American will not
follow suit?
How much should American be willing to spend to reduce its marginal cost to 25, assuming that
Texas Air will have marginal costs of 25 regardless of American’s actions?

Opdracht 12.9 (*)

Suppose that two oligopoly firms set prices to maximize their profits. Each faces the same constant
marginal cost, m = $10 and FC = 0.
The demand function for Firm 1 is q1 = 100 – 2p1 + p2 and for Firm 2 is
q2 = 100 + p1 – 2p2, where p1 is Firm 1’s price and p2 is Firm 2’s price.

a. Suppose the two firms set their prices at the same time.
Find the resulting Nash equilibrium.
What price will each firm charge, how much will it sell, and what will its profit be?
(Hint: Maximize the profit of each firm with respect to its price.)
b. Suppose Firm 1 sets its price first and then Firm 2 sets its price.
What price will each firm charge, how much will it sell, and what will its profit be?
c. Suppose you are one of these firms, and there are three ways you could play the game:
(i) Both firms set price at the same time.
(ii) You set price first.
(iii) Your competitor sets price first.
If you could choose among these options, which would you prefer? Explain why.
d. What would be the price, quantity and profit if both firms agree to sell at the same price (collusion)
to maximize total profit.

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Opdracht 12.10 (*)

How would your results from Opdracht 12.9 change if Firm 1’s marginal cost is only $5 per unit and
Firm 2’s marginal cost is still $10 per unit?

Opdracht 12.11 (*)

Two firms compete by choosing price.
Their demand functions are:
Q1 = 20 − P1 + P2 and Q2 = 20 + P1 − P2
where P1 and P2 are the prices charged by each firm, respectively, and Q 1 and Q2 are the resulting
demands.
Note that the demand for each good depends only on the difference in prices; if the two firms colluded
and set the same price, they could make that price as high as they wanted, and earn infinite profits.
Marginal costs are zero.

a. Suppose the two firms set their prices at the same time. Find the resulting Nash equilibrium.
What price will each firm charge, how much will it sell, and what will its profit be?
(Hint: Maximize the profit of each firm with respect to its price.)
b. Suppose Firm 1 sets its price first and then Firm 2 sets its price.
What price will each firm charge, how much will it sell, and what will its profit be?
c. Suppose you are one of these firms, and there are three ways you could play the game:
(i) Both firms set price at the same time.
(ii) You set price first.
(iii) Your competitor sets price first.
If you could choose among these options, which would you prefer? Explain why.

Opdracht 12.12

Suppose the market for tennis shoes has one dominant firm and five fringe firms.
The market demand is Q = 400 - 2P.
The dominant firm has a constant marginal cost of 20 and a zero fixed cost.
Each fringe firm has a marginal cost of MC = 20 + 5q and a zero fixed cost.
(q = quantity of one fringe firm and Qf = total quantity of the fringe firms)

a. Verify that the total supply curve for the five fringe firms is Q f = P - 20.
b. Find the dominant firm’s demand curve.
c. Find the profit-maximizing quantity produced and price charged by the dominant firm, and the
quantity produced and price charged by each of the fringe firms.
d. Suppose there are ten fringe firms instead of five, with an equal individual MC = 20 + 5q f.
How does this change your results?
e. Suppose there continue to be five fringe firms but that each manages to reduce its marginal cost
to MC = 20 + 2q. How does this change your results?

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Opdracht 12.13

Assume that the market demand for a product is given by Q = 200 – P.

There are n =10 fringe firms, each with a TC = 5q2 + 40q.
The costs for the dominant firm are TCdom = 40Qdom + 1000
Determine:
- the price for the product
- the output of the dominant firm and a fringe firm
- the profit of the dominant firm and the fringe firm

(*) Deze oefeningen moeten alleen gekend zijn indien het Bertrand-model besproken wordt in de
theorie.

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Oplossingen zelfstudieopdrachten

12.1
1. q1 = 80 , q2 = 30 , p = 45
2. q1 = 90 , q2 = 5 , p = 52,5
3. maximale overnameprijs = 1312,5
4. neen, cournot-nash evenwicht
5. a. q1 = 93,33 , q2 = 26,67 , p = 40
b. q1 = 77,5 , q2 = 35 , p = 43,75

12.2
a. Q1 = 76 en Q2 = 38
P = 43
π1 = 2888 en π2 = 912
b. Q1 = 63,33 en Q2 = 31,67
P = 52,50
π1 = 3008,33 en π2 = 1161,18
c. Q1 = 76 en Q2 = 38
P = 43
π1 = 2888 en π2 = 912

12.3
a. If the firms collude: Q = 4 , Q1 = 4 , Q2 = 0
If firm 1 was the only entrant: Q1 = 4
If firm 2 was the only entrant: Q2 = 3,8
b. Q1 = 2,8 π1 = $19,20
Q2 = 2,4 π2 = $18,80
c. $ 40,80

12.4
a. Q1 = Q2 = 80
P = $140
Π1 = Π2 = $6400
b. Q = 120
P = $180
Π1 = Π2 = $7200
c. Q(1) = 120
Π(1) = $14400
d. Q1 = 60
Q2 = 90
P = $150
Π1 = $5400
Π2 = $8100

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12.5
Dit klopt, zolang MC2 ≥ 15.
Q2 = 0 , Q1 = 15 en P = $15 (= monopolieprijs)

12.6
a. QE = QD = 30 mio
P = $40
ΠE = ΠD = $450 mio
b. QE = QD = 22,50 mio
P = $55
ΠE = ΠD = $759,4 mio
c. QE = 25,7 mio , QD = 21,4 mio
P = $52,90
ΠE = $772,3 mio , ΠD = $689,1mio
d. QE = QD = 18 mio
P = $ 64
ΠE = ΠD = $810 mio

12.7
a. Q1 = Q2 = 22,5  Q = 45
P = $165
Π1 = Π2 = $2278,125
b. Q = 36
P = $ 192
Π1 = Π2 = $2430
c.
Winst Payoff Matrix BBBS
Cournot Cartel
WW Cournot 2278 ; 2278 2582 ; 2187
Cartel 2187 ; 2582 2430 ; 2430
d. Q1 = 25,7 Q2 = 21,4
P = $158,70
Π1 = $2316,86 Π2 = $2067,24

12.8
a. ΠAA= ΠTA = $400
b. Q = 45 (QTA = 30 and QAA = 15) ; ϖTA= 900 and ϖAA = 225
c. Texas airlines should be willing to invest up to $500
American airlines should be willing to invest up to $400

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12.9
a. p1 = p2 = 40
q1 = q2 = 60
ϖ1 = ϖ1 = 1800
b. p1 = 42,14 p2 = 40,53
q1 = 56(afgerond) q2 = 61(afgerond)
ϖ1 = 1799,84 ϖ2 = 1862,33
c. iii

12.10
P1 = 37,33 q1 = 64,67 π1 = 2090,78
P2 = 39,33 q2 = 58,67 π2 = 1720,79

12.11
a. P1 = $20 q1 = 20 Π1 = $400
P2 = $20 q2 = 20 Π2 = $400
b. P1 = $30 q1 = 15 Π1 = $450
P2 = $25 q2 = 25 Π2 = $625
c. (iii) both firms enjoy increased profits, but the follower does better.

12. 12
a. P = 80 , Qdom= 180 , qi (Fringe) = 12
b. P = 65 , Qdom= 180 , qi (Fringe) = 9
c. P = 60 , Qdom= 180 , qi (Fringe) = 20

12.13
P = 80 , Qdom= 80  Пdom= 2200
qi (Fringe) = 4  Пi fringe= 80

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