onsider the dominant firm

onsider the dominant firm

onsider the dominant firm model. We are interested in determining the effect of the elasticity of fringe supply on the market power of the dominant firm.Draw a market with a dominant firm in initial equilibrium. Be sure to draw a large graph (we are going to add to it) and clearly label all relevant prices and quantities.Now, show the effect on the price and market quantity of a flattening of the competitive fringe supply curve (i.e. adownward).Comment on the differences, what do they imply about the new market power of the dominant firm?Solve for ??/??. What is its sign? What happens to the value of the derivative as S approaches 1? Why is this intuitive?

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