Game Theory- Microeconomics
the five competitive forces model
- competition from existing firms -the threat for new entrants -competition from substitute goods or services -bargaining power of suppliers - bargening powers of buyers
conditions that cause oligopoly
- ownership of key input - government imposed barriers -economics of scale
Prisoner's dilemma
-game where both players have dominant strategy - both players are worse off when they play their dominant strategy then they would be in other scenerio's - noncooperation
what features does game theory have?
-players - rules -strategies -payoffs
nash equilibrium
a situation where each firm chooses the best strategy
sequential games are solved __________
backwards
3 examples of ogilopolies
computers, athletic footware, and cigerettes
a game theory analysis of deterring entry concludes that...
deterring entry may be a good or bad idea
oligopoly
industry with only a few firms
dominant strategy
strategy that is best for the firms
how is game theory used in econ?
the rules of the game include matters beyond a firm's control, a strategy is a firms actions to achieve a goal, and the payoffs are profits
sequential move
where one firm acts first and the other firms respond