ECON 1B03 Lecture Notes - Lecture 13: Nash Equilibrium, List Of Post-Nominal Letters, Oligopoly

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ECON 1B03 Full Course Notes
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ECON 1B03 Full Course Notes
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Oligopoly- the market is controlled by two or more firms (like monopoly but more than 1 firm) Independent firms: one firm"s decision affects another"s firm"s products. Example: robin and willis are the only two producers of clean drinking water. They pump the water at no expense to them, and sell it. P = , q = 60, profit = . If cooperative, they would split the q at 30 make a profit of . Collusion- agreement among firms in a market about quantities to produce or price to charge. If they split, there"s a temptation to cheat and increase their profits. Robin could produce 40 barrels, so the 70 barrels would be sold at each, but he would make a profit ( more than before). Will"s profits will drop to so he starts cheating by selling 40 barrels, and now, both make a profit of. End result; stop the cheating came at 40 barrels = suboptimal outcome.

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