ECON 1116 Chapter Notes - Chapter 17: Nash Equilibrium, Oligopoly, Marginal Cost
14 Mar 2016
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11/15/2013 (cid:1) (cid:1) (cid:1) (cid:1) (cid:1) (cid:1) (cid:1) (cid:1) (cid:1) (cid:1) Game theory the study of how people behave in strategic situations. A situation in which a person when choosing among alternative courses of action must consider how others might respond to the action he takes. Duopoly a oligopoly with only two firms. Collusion an agreement among firms on how much to produce. Cartel a group of firms acting in unison. They pursue their self interest which in turn ends up raising production level and lowering prices. How the size of an oligopoly affects the market outcome. The more firms in an oligopoly the harder it is to coordinate production. At any time a firm has the option to raise production and in doing so will face two effects. The output effect because price is above marginal cost selling one more gallon of water at the going price will raise profit.
