Econ. 101 Notes 3

Econ. 101 Notes 3 - -as long as MSB exceeds MSC keep up...

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-as long as MSB exceeds MSC, keep up sales/ production -price discrimination-charge people relative to how much they value a good; actually beneficial to society b/c it ensures that the optimal number of people can obtain the good -illegal downloading of music actually increases profits for the music industry, b/c people are then more likely to actually buy a CD if they sample it through downloading -grim strategy-“hurt me once, you’re on my list forever”; try to hurt other player every time if they hurt you once -tit for tat-make same choice that other player made in previous turn -second mover advantage-wait to make move until other player makes the first move -prisoner’s dilemma-both players play dominant strategies, end up at solution that is not optimal -Nash equilibrium-a state where no one has any incentive to change their behavior, unless the other player changes their behavior first -market failure: -efficiency-monopoly power (lower output, below optimal level), public good problem (non rival goods, non exclusion [excessively costly to keep someone from enjoying a good,
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Econ. 101 Notes 3 - -as long as MSB exceeds MSC keep up...

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