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Unformatted text preview: determines rates of charging ii. Patent, copyright, and license protections are a form of ex ante regulations: firms that follow the rules receive protection III. Competition among the few (Oligopoly) a. Sometimes products are differentiated, or homogenous b. Very few sellers c. Entry is limited either by legal restrictions (banking in most of the world) or by a very large minimum efficient scale (overnight mail service) d. How they compete i. Firms know there are only few competitors ii. Take account of the effects of their actions on the overall market iii. Use Game theory 1. All players are specified in advance: you know your competitors 2. You know the list of possible actions 3. Payoffs: the amount each player gets for every possible combination of the players actions 4. Nash non-competitive equilibrium is the set of actions for all players that no player can improve his or her payoff by playing a different action...
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- Fall '06