ECO101H1 Chapter Notes - Chapter 14: Normal-Form Game, Imperfect Competition, Oligopoly
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ECO101H1 Full Course Notes
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Industries with only a small number of producers. Imperfect competition, since producers know they can affect the market price. Hhi (herfindahl-hirschman index): measure of how concentrated an industry is. 1^2 (100) = 1 (perfect competition = really small) Collusion: when producers cooperate to raise joint profits. Cartel: agreement among producers to obey output restriction. Non-cooperative behavior: when firms act in own interests and ignore other firms profits and shit, eventually driving both firms profits down. Game theory: study of behavior in situations of interdependence. Payoff: reward earned by player in the game (oligopolist) Payoff matrix: shows how payoff of each participant depends on actions of both. Prisoners" dilemma: each player has incentive to cheat; but if both cheat, both are worse off than if neither had e. g. rat your friend out or naw. Nash equilibrium (noncooperative equilibrium): is where both players screw each other over lol. Strategic behavior: both players are loyal to each other.
