14_01_lec28

14_01_lec28 - Cite as: Chia-Hui Chen, course materials for...

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Unformatted text preview: Cite as: Chia-Hui Chen, course materials for 14.01 Principles of Microeconomics, Fall 2007. MIT OpenCourseWare (http://ocw.mit.edu), Massachusetts Institute of Technology. Downloaded on [DD Month YYYY]. 1 1 Stackelberg 14.01 Principles of Microeconomics, Fall 2007 Chia-Hui Chen November 26, 2007 Lecture 28 Oligopoly Outline 1. Chap 12, 13: Stackelberg 2. Chap 12, 13: Bertrand 3. Chap 12, 13: Prisoner’s Dilemma In the discussion that follows, all of the games are played only once. and 1 Stackelberg Stackelberg model is an oligopoly model in which firms choose quantities se- quentially. Now change the example discussed in last lecture as follows: if firm 1 pro- duces crispy and firm 2 produces sweet, the payoff is (10 , 20); if firm 1 produces sweet and firm 2 produces crispy, the payoff is (20 , 10) (see Table 1). Firm 2 Crispy Sweet Firm 1 Crispy Sweet-5,-5 20,10 10,20-5,-5 Table 1: Payoffs of Firm 1 and 2. − 5 , − 5 10 , 20 20 , 10 − 5 , − 5 This is an extensive form game; we use a tree structure to describe it. Firm 1 Firm 2 Sweet Firm 2 Crispy (-5,-5) (10,20) (20,10) (-5,-5) Sweet Sweet Crispy Crispy Cite as: Chia-Hui Chen, course materials for 14.01 Principles of Microeconomics, Fall 2007. MIT OpenCourseWare (http://ocw.mit.edu),(http://ocw....
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This note was uploaded on 11/18/2011 for the course ECON 14.01 taught by Professor Pindyck during the Fall '08 term at MIT.

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14_01_lec28 - Cite as: Chia-Hui Chen, course materials for...

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