Oligopoly

If one firm in an oligopoly cuts prices, then most likely, its competitors will:

also cut prices

In an oligopoly, each firm must think about:

how rivals will react to their actions

collusion

secret agreement or cooperation between oligopolists for increasing profits

the ultimate game

the first person only gets the money if the other person accepts the offer. If the second person does not accept, they both get nothing

game theory

the study of how people behave in strategic situations

Battle of the Sexes Game

A game in which both players want to coordinate, but each player prefers coordinating on a different outcome. Ends up with mixed strategy or randomization

Oligopoly

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

What are three elements of game theory?

A. Players B. Actions that the players can take C. Payoffs that the player can receive

In a prisoner's dilemma, what is the dominant strategy for both ?

Confessing

In Nash equilibrium, if everyone else's strategy remains constant, then:

I can't improve payoff by changing strategy

Matching pennies game

No pure strategy NE

Why is there difficulty in collusion?

Private incentive

Nash Equilibrium

a situation in which economic actors interacting with one another each choose their best strategy given the strategies that all the other actors have chosen

dominant strategy

a strategy that is best for a player in a game regardless of the strategies chosen by the other players

Chicken Game

a version of the battle of the sexes game that results in disaster if each player plays his or her tough strategy