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Ch 13 Oligopoly and Game Theory

Ch 13 Oligopoly and Game Theory - Oligopoly Chapter 13 1...

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Oligopoly Chapter 13 1
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Market Structure 2
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Oligopoly Market Structure in which Natural or legal barriers prevent the entry of new firms Natural barriers: economies of scale enable a small number of firms to supply the entire market at lowest possible price Legal barriers: barriers that prevent further entrance into the market, example: taxi licensing A small number of firms compete 3
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Oligopoly—Examples 4
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Oligopoly--Behavior Because of interdependence of firms, Economists think about Oligopoly as a game. Use Game theory to explain strategic behavior of firms Game Theory : a tool for studying strategic behavior—behavior that takes into account the expected behavior of others and the recognition of mutual interdependence 5
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Game Theory Three elements to the framework 1. Players and Rules Duopoly: an oligopoly market with 2 firms 2. Strategies All possible actions of each player 3. Payoffs Results of all different strategies Represented in a “payoff matrix” 6
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Ch 13 Oligopoly and Game Theory - Oligopoly Chapter 13 1...

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