ECON 2G03 Lecture Notes - Lecture 7: Tacit Collusion, Normal-Form Game, Demand Curve
16 Jan 2019
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Cournot equilibrium- equilibrium in the cournot model in which each firm correctly assumes how much its competitor will produce and sets its own production level accordingly. In setting output, firm 1 must therefore consider how firm 2 will react. Betrand model: oligopoly model in which firms produce a homogenous good, each firm treats the price of its competitors as fixed, and all firms decide simultaneously what price to charge. Payoff matrix: non-cooperative game- game in which negotiation and enforcement of binding contracts are not possible. Price rigidity- characteristics of oligopolistic markets by which firms are reluctant to change prices even if it costs or demands change. Kinked demand curve model- oligopoly model in which each firm faces a demand curve kinked at the currently prevailing price, at higher prices demand is very elastic, whereas at lower prices it is inelastic.
