Baumol and Blinder argue that oligopolies are interdependent firms. What do they mean by this? Give three examples of the types of interdependence which might occur
Oligopolists are few in number, and they can closely watch each other. In this case, strategic behavior can be expected. When considering oligopolies, competition tends to resemble military campaigns, rather than the impersonal perfect competition considered earlier.
The several types of oligopoly models are an indication of the types of interaction between firms. Specifically, firms will observe the price of rivals-they may match price (such as price leadership), or only some price changes (kinked demand curve). Second, they will watch the quality of rivals' goods (differentiated oligopoly). Third, they will observe rivals' advertising and may counter with their own (differentiated oligopoly).
You might also like to view...
Grant has $200 to spend each month on restaurant meals and jazz performances at his
neighborhood jazz club. The price of a typical restaurant meal is $20 and the price of a jazz performance ticket is $10. Grant is maximizing his utility by consuming 6 restaurant meals and attending 8 jazz performances. Suppose Grant still has $200 to spend, but the price of restaurant meal rises to $25, while the price of jazz performance ticket drops to $8. Can it be determined if Grant is better off or worse off than he was before the price change? Use a budget constraint/indifference curve graph to illustrate your answer.
Types of rationing:
What will be an ideal response?