Lecture 8 Notes.docx

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Department
Economics for Management Studies
Course
MGEC40H3
Professor
Jack Parkinson
Semester
Summer

Description
MGEC40 Lecture 8AnnouncementsTodays lecture is not on the midtermMidterms are mostly shortanswer questions and some definitionsStrategic CommitmentDefinition a decision that has longterm impacts and is difficult to reverseIn order for strategic commitment to work you need it to be three thingsoVisibleoUnderstandableoCredibleSeveral things can help foster credibilityIrreversibleContractReputationExamples Imagine you and I are rival firms and were doing the Cournot Game and theres a third party referee Both of us has to simultaneously announce quantities then referee plugs them into the demand curve to get the equilibrium This was the original Cournot Game What if you changed the game so that one firm calls first The other firm will plug this quantity into their best re
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