ECON 305 Lecture Notes - Lecture 5: Extensive-Form Game, Chain Store, Nash Equilibrium
11 Dec 2014
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Constituent (single play) vs super (repeated play) games. In single play models such as cournot, bertrand and stackelberg it is very unlikely that cooperation will take place. If you know the number of periods in the game the chain store rule applies, the same outcome of a single play applies. In zero-sum games, the winner"s gain is the loser"s loss; the gains add up to 0 e. g. chess. If a game is over market share, it will be a zero-sum game. With most industry rivalry, a firm can increase its profits but it does not mean that the profit of the other player may decrease by the same amount or decrease at all. Industry profits need not to add up to zero. Simultaneous games give rise to prisoner"s dilemma whereas sequential games introduce an asymmetry where the person that can make the first move has an advantage. >see limit pricing where 1 firm has an advantage, chapter 11.
