ECON10004 Lecture Notes - Lecture 16: Oligopoly, Strategic Dominance, Nash Equilibrium
27 Jul 2018
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Document Summary
Before you take an action you think about what others will do/react. Anticipating other parties" decisions helps you to make the best decision. Strategic situations are ubiquitous and decision-making in these v situations is important. Strategic situations involve inter-dedpendency between the decisions of the decision-makers. Game theory can provide guidance on decision-making in strategic situations. Decision-making in strategic situations can be complex and involve psychological considerations. Many markets where few sellers interact strategically (e. g. ) major banks, coles/woolworths. Note: payoff represents the total effect of an outcome on a player"s well-being, both monetary and non-monetary. Each player choose a strategy that is a "best response" to strategies of other players. No player has any incentives to change their action given what others are doing. Without observing the choices of any other players. At least one player observes a decision made by another player prior to choosing their own strategy. Player with more information is reaction to the decisions madfe by others.
