Overview
Collusion
PD Game
Trigger Strategy (grim strategy) with discounting
Tit for Tat (Nice Strategy)
Trigger
G
E
Westinghouse
C
D
C (100,100)
(25,120)
D (120,25)
(80,80)
Note that a rational player would never play a dominated strategy, they would
Economics 3461
Problem Set 3
From your book:
Chapter 12 problem #1.
Chapter 15 (4th ed) problem #3 (for the 3rd edition its chapter 14 #3).
1. Firm 1 faces demand of q1=84-2P1+P2, and has marginal costs of 8 per unit. Firm 2
faces demand of q2=92-2P2+P1,
Economics 3461
Problem Set 2 Solutions
Note: Please try the problems first before consulting the solutions!
1.a. Find the equations for each firm's residual demand and residual marginal revenue
curves.
For firm 1: P=(a-bq2)-bq1, MR=(a-bq2)-2bq1.
Firm 2s e
Class Announcements:
Focus on 11.1.1-. 11.1.3 *KREPS+WILSON MODEL (WON'T FOCUS ON
LIMIT P)
ONLY RESPONSIBLE FOR CHAPTER 11 ON THE MIDTERM
PRICE STRATEGIES
2 PLAYERS, INCUMBENT AND POTENTIAL ENTRANT
Limit P: Incumbent uses price to deter entry.
Predation
The Cournot-Nash model
is based on the assumption that a rm's competitors maintain their current
outputs.
Model results in an equilibrium quantity that is greater than the monopoly
quantity but is less than the competitive quantity.
Stackelberg model
Today: Regulation and Deregulation
Ofce Hours: 10-12 saturday book worms
Final: 4 out of 5 questions
- 3 questions from last section
Betrand
non-price strategies
R & D + VR's (vertical restraints/restrictions)
Regulation
Study old questions - nal is cumul