Essay about An Oligopoly Model By The French Economist Augustin Cournot

1488 Words Feb 20th, 2016 null Page
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 our products at an equilibrium price, but can now offer our products at an optimal price that we can maximize our profits with. “The Cournot oligopoly model, proposed by the French economist Augustin Cournot, asserts that each firm, in determining its profit-maximizing output level, assumes that the other firm’s output will not change” (McGuigan, Moyer, & Harris, 2014). So our plan is to ascertain our profit maximizing price by setting our marginal revenue to our marginal cost because of our new status in the low-calorie frozen food market. Because the competition is no longer perfect our demand will not drop, since there won’t be alternatives to choose from. Obviously we can’t charge a ridiculous amount because there are still food…

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