BUSS1040 Lecture Notes - Lecture 7: Oligopoly, Market Power, Asteroid Family

• School: University of Sydney
• Department: Business Studies
• Course: BUSS1040
• Professor: Dr Katrien Stevens

Document Summary

Think of this as strategic interaction: what happens if one business makes a decision (about price or quantity, or choice on advertising, quality of product), how that will impact its rivals, and the response of their rivals. Many different models to explain this type of behavior: choices over price, choices over quantity, choices over characteristics of a good, choices over activities such as market entry. The nature of how firms interact in a strategic sense, is sensitive to a particular market situation. Game theory is a tool used to analyze the strategic interaction of agents (firms or people: describes games (interactions) and predicts their outcome. Conditional on rules of the game, information, etc. Rules: describes how the game works what choices are made, and/or how those choices are made. For example, a game of firms playing a game over choosing price or quantity. For example, if a rival chooses a high price, and the firm responds with a low price.