By R. E. Kuenne

ISBN-10: 0444879374

ISBN-13: 9780444879370

Oligopoles. Equilibre (Economie politique)

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**Extra resources for Rivalrous consonance : a theory of general oligopolistic equilibrium**

**Example text**

5. THE STRUCTURE OF THE ANALYSIS The presentation of rivalrous consonance theory is structured at three levels of analysis. The first level is the determination of oligopolistic prices when each firm assumes its rivals' prices are fixed in choosing its optimal price. Models 1, 2, and 3 are analyzed at this simple level in Chapter 2. In Chapter 3 the analysis t u r n s to solution and parametric displacement techniques for the programming formulations of rivalrous consonance at this first level.

8. 8 reveals. 8 meets the first-order condition (26), for MOPi — 0, although it maximizes the target deviation. In practice, therefore, we recommend adding a constraint t h a t requires (n[ - ni) to equal zero, which will ensure that pi'or pi"will be attained, unless one or more other constraints bind. In t h a t case the solution should be recalculated with the profit constraint removed. We have found t h a t the SUMT algorithm works well in this latter instance, permitting the equality constraint to depart from equality to allow inequality constraints to bind, rather than rejecting the problem as one with an infeasible constraint set.

Thus, for example, the curve MC t is firm i's own marginal cost function, and if the firm set all 0ij to zero and did not restrict the extent to which it could lower price profit would be the rectangle ABCD (we assume average total cost equals marginal cost). Suppose, now, t h a t firm i adopted a rivalrous consonance attitude in its pricing but repealed self-imposed restrictions on its ability to reduce price. Extended profit -which includes only own-profits plus extended marginal rival profit (EMRPi) plus MCi equal marginal revenue (MRi).

### Rivalrous consonance : a theory of general oligopolistic equilibrium by R. E. Kuenne

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