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The Dominant Firm - Price Leadership

The Dominant Firm - Price Leadership. There are a number of models E.g. barometric price, kinked demand A dominant firm with full information about market demand and industry costs can set prices so that it earns economic profit whilst the passive fringe earns a normal rate of return.

erich-shepard
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The Dominant Firm - Price Leadership

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  1. The Dominant Firm - Price Leadership • There are a number of models • E.g. barometric price, kinked demand • A dominant firm with full information about market demand and industry costs can set prices so that it earns economic profit whilst the passive fringe earns a normal rate of return.

  2. The Dominant Firm Model (1) P Sf D 0 Q

  3. The Dominant Firm Model (2) P MC=Sf MC L D L D MR L 0 Q

  4. The Dominant Firm Model (3) P MC=Sf MC L D L P* D MR L 0 Q Qf QL

  5. Comparing the dominant firm with perfect competition. P MC=Sf MC L P* Ppc D 0 Q Qpc Qdfm

  6. What if the demand and supply curves were more (in)elastic?What if the fringe supply increased in size?

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