ECO 3343 Lecture Notes - A Simple Game, Strategic Dominance, Models 1
Document Summary
The dominant approach to microeconomics in graduate schools. Game theory = a theory for studying choice under conditions of strategie interaction. Strategie interaction= the outcome of your choices depends on other"s choices. What you do affects the welfare of others and vice versa. Have to made your choices anticipating what they will do. Game theory is the theory for analyzing this kind of behavior. Oligopolistic firms de ide price in anticipation of how other firms will respond. Three elements to all game theory models: the players. The decision-makers who have to cho0se what to do. In oligopoly, the players are the firms: the strategies, the payoffs. The possible choices the players can make. What the firms can decide to do. 1he outcomes or consequences of the strategies. For firms, the payoffs are profits or losses. Firm a"s payoff depends on what firm a does, but also on what firm b does. A simple game theory model: the players.