Other researches showed that advertizing promotes increase of profit. They specify that the share of expenses on advertizing in relation to sales volume in branch is higher, the branch rate of return is higher. And since higher rates of return indicate existence of the exclusive power, it means that advertizing conducts to bigger control of the price. Whether not clearly, however, cause higher advertizing expenses higher profits or higher profits cause heavy expenses on advertizing.
The pricing limiting an entrance on the market shows how fears before emergence in the market of new competitors can push the maximizing profits of firm temporarily not to exercise the exclusive power in the market.
For algebraic representation of pricing for the leader we will accept that branch demand is characterized by a formula Q^D = and - bP, function of the general expenses of all has TSA appearance = 25QA^2, and the leader — TSL = k + lql, where qa, ql respectively release of outsiders and the leader.
The curve EXPERT represents average costs of release of all participants of a cartel agreement. For prevention of appearance of new competitors instead of a combination of Rm, 0m, Kurno corresponding to a point, it is necessary to choose a of pl, ql. Then residual (unsatisfied) demand in this market will be presented by a piece of pl, Q1, is entirely located below a curve of average expenses. Therefore if potential competitors have technology, with members of cartel, not favourably to make this benefit to them.
Generalization of model of Kurno. Using prerequisites of a of a duopoly of Kurno, it is possible to construct model at any number of competitors. Let's accept for simplification that all competitors have identical costs of a unit of production: ACi = 1 = const; i = 1., n. Then the profit of i-that firm is equal to i, = to Pqi, - lqi; as P = g - h qi, profit of i-that firm it is possible to present in the form
The same balance can be represented and in a different way. Curve reactions show the amount of release maximizing profit which will be carried out by one firm if the sizes of other firm rival are given.