micro economics

Nash Equilibrium

a situation in which economic participants interacting with one another each choose their best strategy given the strategies that all the others have chosen. each player's choice is their best response to what they expect the other player to do and each player's expectation is correct about what they expect the other player to do.

Anti-coordination

a situation where people or entities intentionally choose different but complementary options to avoid being in the same situation or making the same choice. It's like a strategy of intentionally doing something different from others to stand out or avoid duplication.

coordination game

a type of game in game theory where the outcome depends on the choices made by players, and the key is for players to coordinate their strategies to achieve a mutually beneficial outcome.

One shot game

a type of game in game theory where the players make decisions simultaneously or sequentially, and the game consists of only one round or stage. In other words, there is no repetition or continuation of the game, and players make their decisions without the opportunity for future interactions.

collusive agreement

an agreement between two (or more) producers to restrict output, raise the price, and increase profits

Marginal Revenue Product

an economic concept that measures the additional revenue generated by employing one more unit of a factor of production (such as labor or capital) while holding other factors constant.

what is group pricing?

group pricing charges different amounts based on identifiable characteristics of different groups of people.

three conditions for price descrimination to be used as a market strategy by businesses are...

market power preventing resale, and being able to identify customers that are willing to pay different ammounts.

sequential games

players make decisions one after another, so one player responds to the known decisions of other players

what is perfect price descrimination

pricing strategy in microeconomics where a seller charges each consumer the highest price they are willing to pay for a product or service. In other words, in a perfect price discrimination scenario, the seller tailors the price of each unit of the product to each individual consumer's maximum willingness to pay.

diminishing returns

stage of production where output increases at a decreasing rate as more units of variable input are added

Market structure

the competitive environment in which youre doing business

The economic term for the most a consumer is willing to pay is...

the reservation price

game theory

the study of how people behave in strategic situations

substitution effect

when consumers react to an increase in a good's price by consuming less of that good and more of other goods

what are some qualities of a finitely repeated game?

1) Unlike infinitely repeated games, there is a clear endpoint to the interaction. This knowledge influences strategic considerations and player behavior, especially as the final round approaches ( players tend to cheat in final round) 2) Finitely repeated games can facilitate cooperation between players. Knowing that there are future interactions, players may choose cooperative strategies to build trust and mutual benefit over time. 3) Finitely repeated games allow for the possibility of punishment or retaliation. A player who defects may face consequences in subsequent rounds, influencing their behavior. 4) The finite nature of the game affects the credibility of threats and promises. Players must consider the consequences of not following through on threats or promises in the future rounds.

Labor supply curve

A curve that shows the quantity of labor supplied at different wage rates. Its shape depends on how households react to changes in the wage rate.

factor market

A factor market is a marketplace where factors of production, such as labor, capital, land, and entrepreneurship, are bought and sold. In other words, it is a market where the services of factors that contribute to the production of goods and services are exchanged

Oligopoly

A market structure in which a few large firms dominate a market

Monopoly

A market with no direct competitors

strategic games

An action situation where there are two or more mutually aware players, and the outcome for each depends on the actions of all.

Backward Induction

Backward induction is a reasoning process used in game theory, particularly in analyzing sequential games with perfect information. It involves working backward from the end of a game to the beginning, determining the optimal strategy at each decision point along the way. This method is particularly useful in games with a clear and known endpoint.

four step recipe

Specify the Players and Their Strategies: Write Down the Payoff Matrix: Apply the Dominance Principle, if Applicable: Predict the Outcome:

grim trigger strategy

The Grim Trigger Strategy involves a commitment to cooperation as long as all players continue to cooperate. However, if at any point a player defects or cheats (violates the cooperative agreement), the Grim Trigger is triggered. This involves severe and sustained punishment against the defector.

Prisoners Dilemma

The Prisoner's Dilemma is a classic concept in game theory, illustrating a situation where individual rationality leads to a suboptimal outcome for both participants. While it would be collectively better for both to cooperate, each individual has an incentive to defect, leading to a dilemma where rational self-interest results in a suboptimal outcome for both.

Market Power

The ability to raise your price without losing many sales to competing businesses

what are some qualities of an indefinitely repeated game?

a game in which players do not know when interactions will end.

Labor demand curve

a graph that illustrates the amount of labor that firms want to employ at each given wage rate

Perfect competition

a market structure in which a large number of firms all produce the same product and there are many sellers and buysers who are relatively small relative to the size of the market.

monopolistic competition

a market structure in which many companies sell products that are similar but not identical