lec21 - Economics 101A(Lecture 21 Stefano DellaVigna...

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Economics 101A (Lecture 21) Stefano DellaVigna April 14, 2009
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Outline 1. Oligopoly? 2. Game Theory 3. Oligopoly: Cournot
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1 Oligopoly? Extremes: Perfect competition Monopoly Oligopoly if there are n (two, f ve. ..) f rms Examples: soft drinks: Coke, Pepsi; cellular phones: Sprint, AT&T, Cingular,. .. car dealers
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Firm i maximizes: max y i p ( y i + y i ) y i c ( y i ) where y i = P j 6 = i y j . First order condition with respect to y i : p 0 Y ( y i + y i ) y i + p c 0 y ( y i )=0 . Problem: what is the value of y i ? simultaneous determination? can f rms i observe y i ? Need to study strategic interaction
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2G a m e T h e o r y Nicholson, Ch. 8, pp. 236-252 ( better than Ch. 15, pp. 440—449, 9th). Unfortunate name Game theory: study of decisions when payo f of player i depends on actions of player j. Brief history: von Neuman and Morgenstern, Theory of Games and Economic Behavior (1944) Nash, Non-cooperative Games (1951) ...
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lec21 - Economics 101A(Lecture 21 Stefano DellaVigna...

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