Cournot Oligopoly

There have been recent changes in our selling environment of our low-calorie frozen, microwavable food products. We had a perfectly competitive market recently, which our plan was to focus on an equilibrium price to produce the right amount of product at the right price to maximize profits among our competitors and because it was perfectly competitive there wasn’t much of a relationship between our prices and their prices. We have now recently determined that our selling environment has changed, so we are outlining a new plan. We have become aware that our selling environment has become imperfectly competitive and now is an oligopoly. Since, we have an oligopoly environment we now have substantial market power and no longer need to sell …show more content…
“The Cournot oligopoly model, proposed by the French economist Augustin Cournot, asserts that each firm, in determining its profit-maximizing output level, assumes …show more content…
Since, this is a food product the FDA has numerous regulations and guidelines that each company must adhere to before even being able to ship out their first product. Because of these regulations it is very expensive to maintain compliance and a company that hasn’t set up the infrastructure might not be able to survive an additional regulation. Now that we have a different plan we will determine what our major cost functions are, so that we can make short term and long term decisions regarding our product. “Cost-volume-profit is a form of accounting, and it is a simplified model that is useful for elementary instruction and for short-term decisions. A critical part of such analysis is the point at which the values of different options become equal” (Bozat, Korubu, Onar, & Abbasoglu, 2014). Given the cost functions that are given we can determine what our breakeven point will be.