rec3 - 15.020 Competition in Telecoms Recitation #3 Othman...

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15.020 Competition in Telecoms Recitation #3 Othman Laraki
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Agenda • Cournot-Nash Equilibrium • Double Marginalization • Imputation Principle Sources: Sappington, David. “Price Regulation.” Handbook of Telecommunications Economics, North-Holland, 2002. Pindyck, Robert; Rubinfeld, Daniel. Microeconomics, Fifth Edition. Prentice Hall, 2002. Carlton, Dennis; Perloff, Jeffrey. Modern Industrial Organization. Addison Wesley Longman, 2000.
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Part I: Cournot-Nash Equilibrium
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First, Let’s Talk about Context Oligopoly: Small number of players in the market, facing no risk of entry Telecommunications market fits • High barriers to entry (huge sunk and unrecoverable costs) • Regulation • Commodity undifferentiated products Oligopoly Æ Somewhere between competition and monopoly conditions Key is pricing power
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Nash Equilibrium A set of strategies is called a Nash Equilibrium if, holding the strategies of all other firms constant, no firm can obtain a higher payoff by choosing a different strategy.
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rec3 - 15.020 Competition in Telecoms Recitation #3 Othman...

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