Lecture Notes 11

Lecture Notes 11 - Here market price = 241 – total...

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Game Theory Oligopoly Applications Elements of a Game Form Players Actions for each player Timing and information structure Strategies for each player Payoffs for each player from outcomes Nash Equilibrium: Each player is making her/his best response to what the other players are doing.
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A Normal Form Game Simultaneous Play – 2 Players \ G \ B \ Bowling Ballet Bowling \ 3 \ 7 \ \ 2 \ 2 \ Ballet \ 0 \ 0 \ \ 10 \ 1 \ What is the Nash Equilibrium? How did B get his way??
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Another Example of a Normal Form Game \ II \ I \ Selfish Nice Selfish \ 0 \ 0 \ \ 1 \ 2 \ Nice \ 2 \ 1 \ \ 10 \ 10 \ This game has a very nice Nash Equilibrium
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The Classic Battle of the Sexes \ G \ B \ Bowling Ballet Bowling \ 3 \ 10 \ \ 2 \ 2 \ Ballet \ 0 \ 0 \ \ 10 \ 3 \ Multiple Nash Equilibria – which one will result? If any??
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The Cournot Oligopoly Game The Nash Equilibrium is the profit max quantity choice of each supplier – given what the others are producing
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Unformatted text preview: Here , market price = 241 – total quantity Duopoly Location Game Hotelling’s Principle of Minimum Differentiation Two political parties at the center of the spectrum? The Prisoners’ Dilemma Game An Arms Race as a Prisoners’ Dilemma Common Resources (Pool) Generate a Prisoners’ Dilemma Oligopoly as a Prisoners’ Dilemma Cooperation – Collusion Tit-for-Tat Strategies in a Repeated Prisoners’ Dilemma (with no known endpoint) I’ll play cooperatively, as long as you do, but once I catch you deviating (cheating or going maverick), I will stop trying to cooperate forever! That credible threat may be sufficient to counter – motivate cheating, and create stable cooperation. Needs ability to punish, reliable monitoring for cheating, ability to agree in the first place, and limited gains from cheating...
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Lecture Notes 11 - Here market price = 241 – total...

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