ECO 304K Lecture Notes - Lecture 16: Fax, Strategic Dominance, Externality

• School: UT-Austin
• Department: Economics
• Course: ECO 304K
• Professor: Thomas Wiseman

Document Summary

Cartels face a prisoners" dilemma- they tend to fall apart because cheating is a dominant strategy. One solution is repetition- cheating gives a short-term gain at the cost of wrecking the cartel in the long term. Requires patience, reliable way to detect cheating, stability or firms. Advertising spending, campaign spending, steroid use in sports, arms races, industry: network goods - positive network externality , value to a consumer increases with the number of other consumers using it. Ie. fax machine, electric cars, tv, software, currencies, phones, messaging, ebay, uber, other market platforms, No dominant strategy- want to match other player. Nash equilibrium ; given the action specified for the other players, every single player. A coordination game is happy to play his or her specified action. Here, there are 2: (metric, metric) or (english, english) Coordination games arise in markets for network goods. Each represents an extra credit point on the exam- i will auction them.