BUS 207 Lecture Notes - Lecture 8: Strategic Dominance, Mattress, Bertrand Competition

• School: Simon Fraser University
• Department: Business Administration
• Course: BUS 207
• Professor: Karen Ruckman

Document Summary

If q2 = 0, then q1 = (a c)/2. In general, the output of an n-firm industry behaving as a cd is: q = (n/n+1)(a - c) In the end, each firm ears 0 profit b/c keep over/under-cutting e/o equalizes profit and losses to 0. Limits of bertrand: when firms = capacity-constrained (limited in size) b/c steal the whole market by under-cutting rivals, p competition is limited. I(cid:374) cd = f(cid:1005)"s c , then q1 and q2 : f(cid:1005)"s (cid:396)ea(cid:272)tio(cid:374) f"(cid:374) shift r. I(cid:374) diffe(cid:396)e(cid:374)tia(cid:271)le b = f(cid:1005)"s c , then p1 and p2 : f(cid:1005)"s (cid:396)ea(cid:272)tio(cid:374) f"(cid:374) shift do(cid:449)(cid:374) Idea relies on outcomes where no one has any regrets: ask ea(cid:272)h plate(cid:396) afte(cid:396) the ga(cid:373)e if the(cid:455)"(cid:396)e happ(cid:455) (cid:449)/ho(cid:449) the(cid:455) pla(cid:455)ed gi(cid:448)e(cid:374) ho(cid:449) the other players played. P(cid:396)iso(cid:374)e(cid:396)"s dile(cid:373)(cid:373)a, (cid:449)he(cid:396)e self-interested behavior = self defeating. If we play the pd game for an infinite number of times, will find that there is.