Economics 1021A/B Chapter Notes - Chapter 15: Normal-Form Game, Legal Monopoly, Contestable Market

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ECON 1021A/B Full Course Notes
94
ECON 1021A/B Full Course Notes
Verified Note
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Document Summary

Oligopoly: a market structure in which: natural or legal barriers prevent the entry of new firms. Natural oligopoly: a natural barrier stops firms due to mismatch in demand and price. Legal monopoly: a legal barrier to entry protects the small number of firms in the market. Duopoly: an oligopoly market with only two firms. If there is 1 firm in the market, it makes an economic profit until a second firm enters. If there are 3 firms in the market, all firms make an economic loss until a firm leaves: a small number of firms compete. Each firm"s actions influence the profits of all the other firms. Game theory: a set of tools for studying strategic behaviour that the expected behaviour of others and the recognition of mutual interdependence. Game: all games share four common features: rules, strategies (the possible actions of each player, payoffs, outcomes.