Managerial Economics and Strategy, 2/e

11 Oligopoly and Monopolistic Competition

Anyone can win unless there happens to be a second entry.

—George Ade

Learning Objectives

1. Explain how firms in a cartel raise their profits by coordinating their actions.

2. Illustrate how firms independently choose their output levels to determine the Nash-Cournot equilibrium.

3. Show how firms independently choose their prices to determine the Nash-Bertrand equilibrium.

4. Explain how two conditions determine the monopolistic competition equilibrium.

Managerial Problem Gaining an Edge from Government Aircraft Subsidies

A manager can use a cost advantage over a rival firm to increase profit. ­Consequently, managers of aircraft manufacturing firms lobby their governments for subsidies and then use these subsidies ...