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AGEC 200 (18)


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McGill University
Agricultural Economics
AGEC 200
Anwar Naseem

Bundling not only are you earning more profits but more CS due to new pricing schemeOligopoly firms behave strategicallyact in relation to how other firms are acting Game Theory how people behave in strategic situationsDominant Strategy best for player in a game regardless of strategies chosen by other playersOne where decision to do something is always the same no mater what someone else does Prisoners dilemma game between two captured criminals that illustrates why cooperation is difficult even when it is mutually beneficialNash Equilibrium individually the best decisionfrom a selfinterest point of view o Bonnie and Clyde example would confess partner because either go free or only 1 yr o Equilibrium you get when dominant strategy is followed o Confessing is dominant strategy Oligopolies as Prisoners DilemmaWhen oligopolies form cartel in hopes of reaching monopoly outcome become players of prisoners dilemmaBell and Rogers duopolists in SmalltownCartel outcome minimizes profits each firm agrees to serve Q30If both increase to Q40 will earn 800 each whereas wouldve earned 900 each if Q30Total profits go down in the end Dominant strategy is to produce 40 and Nash equilibrium is when both profits are 800 and Q40 Monopolistic Competition similar products but certain monopoly
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