Edgeworth's Theory Of Oligopoly Theory

Francis Ysidro Edgeworth’s contributions were in terms of the application of mathematics and statistics to economics (or, better, to the ‘moral sciences’). Below , I will be focusing on Edgeworth’s contribution to the oligopoly theory, emphasising on his ideas and themes that have developed from his work revolving around the concept of ‘indeterminacy’. Edgeworth explains the concept of indeterminacy, where it is the rule when there are a few agents present in the market that the outcomes be indeterminate, whereas when a large economy approaches perfect competition, the outcomes become determinate. Here, I would be explaining the oligopoly model with respect to the partial-equilibrium analysis and the effect on price and output of an oligopolistic

This is explained with respect to the contract curve, which shows a set of points pointing out the final allocations of two goods between two people that could occur as a mutually beneficial trading between those two people given their initial allocation of the goods. It is important to begin with formal core of Edgeworth’s analysis, which explains the concept of pure trade in terms of the “Edgeworth Box”. Describing Edgeworth’s box, it consists essentially the superimposition of indifference maps of two individuals, each to its own co-ordinate axes, in a way that a single point always represents the holdings of each community by each

Edgeworth proposed his theory by first examining the price competition in a duopoly with substitute or complementary products where the quantities of good are denoted by x and y .The duopoly model provides a benchmark to analyse the oligopolistic structure competition with differentiated products. Edgeworth defines the goods to be rival with respect to utility functions and complementary if the cross derivative of the goods turns out to be positive. Edgeworth is credited with introducing the general functional form for the utility function. From this function, direct demands are derived and their properties are