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.

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Answer:

a. Cournot oligopoly.

The largest and probably most powerful cartel in the world, the OPEC (Organization of the Petroleum Exporting Countries), is an example of a Cournot oligopoly. In a Cournot oligopoly, the competing firms decide how much output they will produce. In the case of OPEC, the competing countries decide total output.

b. Stackelberg oligopoly.

The smartphone industry is a clear example of a Stackelberg oligopoly where Apple is the leader and the rest follows. In a Stackelberg oligopoly, the leader establishes output and/or price decisions and the rest follow.

c. Bertrand oligopoly.

The soda industry is an example of a Bertrand oligopoly where Coke is the leader and Pepsi follows. Even thought they control around 70% of the soda markets, they continuously fight and compete against each other, This industry cannot be considered a Cournot oligopoly since price is a major factor in the competition.

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