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oligopoly (game theory (game (common features (rules, strategies, payoffs,…
oligopoly
game theory
game
types
prisoners dilemma
the disappearance of the invisible hand
self interest dont always lead to whats best for society
game of chicken
nokia, apple and RnD
common features
rules
strategies
payoffs
outcome
repeated games and sequential games
cooperative equilibrium
collude and act as one monopoly and share the additional profit
tit for tat
price wars
causes
triggered by falling prices that cause actors to believe other companies are cheating
entrants of new firms and no good way of punishing cheating
contestable markets
features
low barriers and threat of potential entrants
examples
flight routes
strategies
limit pricing
set the price at the highest level that inflicts a loss on the entrant
concepts
strategy
dominant-strategy equilibrium
nash equilibrrium
a takes the best action give the action of player b and viceversa
features
natural or legal barriers to entry
small number of firms compete
interdependence
temption to cooperate
cartel
acting together
limit output
raising prices
increasing economic profit
types
natural oligopoly