Cournot and Bertrand competitors are behaving identically when the number of Cournot competitors increases" - Do you agree with this statement? Justify.

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Industrial Organisation:

"The aggregate profit of Cournot competitors is converging to 0 as the number of competitors increases. Therefore Cournot and Bertrand competitors are behaving identically when the number of Cournot competitors increases." Do you agree with this statement? Justify.

October 2003

Strahinja Zarkovic

Introduction

In the model of monopoly one seller confronts a large number of buyers. The key to analyzing this situation is to understand the information that the monopolist has about the buyers, which determines to what degree the monopolist can exploit his potential bargaining power. But if there are a small number of sellers who interact in a market the analysis of individual firm and the equilibrium outcome becomes more complicated. The profit outcome for each firm depends not only on its own decisions concerning price and quantity, but on the decisions of its competitors. The investigation of oligopolistic markets is central in economics. The Cournot and Bertrand models of oligopoly share several important features that distinguish them from the bulk of other models of imperfect competition. The aim of this essay is to compare those two models of oligopoly, and particularly explain the case when number of Cournot competitors