Chamberlin’s Duopoly Model- Assumptions, Diagram with Explanation Notes
CHAMBERLIN’S DUOPOLY MODEL Chamberlin’s Duopoly Model makes an advance over the classical models of Cournot, Edgeworth and Bertrand. His model is based on the assumption that the duopolists recognize their interdependence and act accordingly. He criticized and rejected the Cournot, Bertrand and Edgeworth cases on the ground that in the real-world firms are not so native that they will not learn from the past experience. One firm’s output or price decision will definitely invite reactions of other firms Chamberlin solution involves a kind of understanding between the two sellers. They do not sign agreement, but each seller is intelligent enough to realize the importance of mutual dependence. Each act rationally, and understands that sharing monopoly profit is to the best of his advantage. Thus, in Chamberlin's model the sellers are independent, yet they are in a kind of collusion which leads to stable equilibrium, a sort of monopoly equilibrium. Assumptions 1. There are t...