Provide a real-world example of a market that approximates each oligopoly setting, and explain your reasoning.

a. Cournot oligopoly,

b. Stackelberg oligopoly,

c. Bertrand oligopoly.

a)

Cournot oligopoly sells homogeneous products at almost the same price to a large number of consumers. They believe that competing firms will keep their output levels unchanged. Therefore, the market best suited to this type of oligopoly is the market for crude oil producing companies where there are few rival giants serving the entire market. They're only fighting for price setting, selling similar products.

b)

Stackelberg's model of oligopoly involves a leader who has succeeded his followers. The leader decides how much to produce and the followers take care of the remaining market. Perhaps the best possible example is the software industry, where the leader and the other rival firms are just producing and selling to the remaining subscribers. Another example could be the cell phone market, where one firm dominates and caters to a small but loyal section of the market. The followers produce and sell to the remaining customers.

c)

Bertrand oligopoly can best be described by the steel industry Almost all steel-producing firms produce standard steel quality. Competition arises on the basis of price-setting when firms on the market compete for prices. Steel is purchased on contract in large quantities Construction companies always look to buy it at the lowest cost possible.

Suppose a new firm enters the market and starts offering steel at a lower cost than any other supplier on the market. All companies will eventually capture the entire market and force competitors to lower their price for their survival.