EC120 Lecture Notes - Lecture 17: Strategic Dominance, Nash Equilibrium
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EC120 Full Course Notes
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Market where only a few sellers ofer relaively similar products. One irm"s decisions about p and q can cause another irm to react. Firm will consider these acion when making a decision. Game theory: study of how people behave in strategic situaions. Ex: cell phone companies in waterloo (duopoly) rogers and telus. Collusion: an agreement among the irms about the price and quanity. Cartel: a group of irms acing in unison. Both telus and rogers would be beter of if both sick to cartel agreement but each irms has incenive to renege on the agreement. Lesson: diicult for oligopoly irms to form a cartel and honor their agreements. Because they have an incenive (higher proits) to deviate from the agreement. Nash equilibrium: a situaion in which economic paricipants choose their own strategy based on the strategies other irms have chosen. Oligopoly q is greater than monopoly q, but smaller than compeiive.
