ECON 1010 Chapter Notes - Chapter 5: Nash Equilibrium, Oligopoly, Perfect Competition

• School: University of Manitoba
• Department: Economics
• Course: ECON 1010
• Professor: Laura K.Brown

Document Summary

There is only one likely outcome: both firms choose to price cut". The strategy recommended by the cartel would end up with the outcome of price cut". This is because both firms would end up increasing their profits by changing their strategy and engaging in a price cut, if the other cartel member selects no price cut". Characterised by multiple possible outcomes, they capture situations where the players benefit from coordinating their decisions. Battle of the sexes: players differ with respect to which activity they would prefer to engage in, but they still prefer engaging in the same activity over going alone. Firms select the activity they wish to perform without communicating with each other. If firms decide to engage in different activities, they get zero utils. If both firms engage in the same activity they obtain a positive amount of utils, but each gets more if they had performed a certain activity.