14_01_lec29

14_01_lec29 - 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 Collusion Prisoners Dilemma 1 14.01 Principles of Microeconomics, Fall 2007 Chia-Hui Chen November 28, 2007 Lecture 29 Strategic Games Outline 1. Chap 12, 13: Collusion Prisoners Dilemma 2. Chap 12, 13: Repeated Games 3. Chap 12, 13: Threat, Credibility, Commitment 4. Chap 14: Maximin Strategy 1 Collusion Prisoners Dilemma Last time we talked about the prisoners dilemma. The conclusion is that they will betray the other. Now apply it to the cases of Cournot and Bertrand models. In the Cournot model, the demand is P = 30 Q 1 Q 2 . The equilibrium will be Q 1 = Q 2 = 10 , with 1 = 2 = 100 . However, to maximize their total profits, they should choose a total quantity Q so that d ( Q (30 Q )) = , dQ which follows that Q = 15 . If they share profit equally, Q 1 = Q 2 = 7 . 5 , and 1 = 2 = 112 . 5 . 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...
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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_lec29 - Cite as: Chia-Hui Chen, course materials for...

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