ECON 1000 Chapter Notes - Chapter 15: Perfect Competition, Oskar Morgenstern, Nash Equilibrium
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ECON 1000 Full Course Notes
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Economists think about oligopoly as a game between two or a few players, and to study oligopoly markets they use game theory. Game theory is a set of tools for studying strategic behaviour behaviour that takes into account the expected behaviour of others and the recognition of mutual interdependence. John von neumann in 1937 and extended by von neumann and oskar morgenstern in. Today, it is one of the major research fields in economics. To find the nash equilibrium, we compare all the possible outcomes associated with each choice and eliminate those that are dominated that are not as good as some other choice. To u(cid:374)dersta(cid:374)d price fi(cid:454)i(cid:374)g, we"re goi(cid:374)g to stud(cid:455) the special case of duopol(cid:455) an oligopoly with two firms. Duopoly is easier to study than oligopoly with three or more firms, and it captures the essence of all oligopoly situations. Somehow, the two firms (cid:373)ust share the (cid:373)arket.