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