Refer to the diagram for a non-collusive oligopolist. We assume that the firm is initially in equilibrium at point E, where the equilibrium price and quantity are P and Q. If the firm's rivals will ignore any price increase but match any price reduction, over what range might marginal cost rise without disturbing equilibrium price and output?
Definitions:
Option Contract
An agreement that gives the holder the choice, but not the obligation, to buy or sell an underlying asset at a set price on or before a certain date.
Foreign Currency
Currency used in a country other than one’s own, reflecting the economic practices and transactions in foreign nations.
Zero Sum Game
A situation in game theory where one participant's gains or losses are exactly balanced by the losses or gains of the other participants.
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