EC260 Lecture 17: Lecture #17
Document Summary
Ec260 lecture #17: game theory: inside oligopoly (continued) Real world examples of collusion: garbage collection industry, opec, nasdaq, airlines. 15,15: nash equilibrium: 0,0, potential repeated game equilibrium outcome: 15,15. The bargaining game in normal forms: normal form assumes both parties are making the decisions at the same time. 500,100 three nash equilibria! fairness: the natural focal point: 300,300. Lessons in simultaneous bargaining: simultaneous-move bargaining results in a coordination problem, experiments suggests that, in the absence of any history, real players typically coordinate on the fair outcome , when there is a bargaining history, other outcomes may prevail. Step 3: add the payoffs the game in extensive form. Step 4: identify the firm"s feasible strategies: management has one information set and thus three feasible strategies, offer , or . Step 6: identify nash equilibrium outcomes: outcomes such that neither the firm nor the union has an incentive to change its strategy, given the strategy of the other.
