ECON 101 Lecture 11: ECON 101 Lecture 11 Tutorial
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Interdependence: a s(cid:373)all (cid:374)u(cid:373)(cid:271)er of fir(cid:373)s i(cid:374) (cid:373)arket where ea(cid:272)h fir(cid:373)"s a(cid:272)tio(cid:374)s i(cid:374)flue(cid:374)(cid:272)e the profits of all firms: firms in oligopoly can make a cartel to change prices and restrict supply for profit maximizing. In collusive agreements, there will be one monopoly profit and quantity which will be divided by number of firms. Q: assume all players are rational and have self interests, will not consider other players. 5 5: for profit in comply and comply, mr = mc, for profit in cheat and cheat, p = mc, the nash eq. is pareto eff. If numbers are not given, assume 0: games consist of players, actions, outcomes, and strategies. Numbers are years in jail (less is better here. ) If the game is finite (time or number of turns), always cheat to make more profit. If the game is infinite, always collude or work together.