CAS EC 101 Lecture Notes - Lecture 23: Matching Pennies, Delta Air Lines, Nash Equilibrium

• School: Boston University
• Department: Economics
• Course: CAS EC 101
• Professor: Michael Manove

Document Summary

Cq: in the long-run equilibrium of monopolistic competition: each firm produces at an efficient level b) there are too many firms c) economic profits are positive, all of the above. Using game theory to analyze offense versus defense. In many competitive situations the offense of one competitor battles the defense of the other: true of many sports like soccer, basketball and american football. If the defense matches the offense, then the defense wins. Example: military strategies: attack from the left or from the right o. If the enemy correctly anticipates your action, you lose the battle. Example: business strategies: master card is better off if it anticipates visa"s market-penetration strategy, but , visa would be better off if master card guessed wrong. Matching pennies is a game-theory model of offense-versus-defense. In this example, eva plays offense; esther plays defense. Eva and esther each puts a penny on the table at the same time.