ECON 1000 Lecture Notes - Lecture 19: Strategic Dominance, Nash Equilibrium, Demand Curve
11 Apr 2016
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Market situation in which only a few sellers offer a similar or identical products. A firm"s decisions about p or q can affect other firms and cause them to react. The firm will need to consider these reactions when making its decisions. Game theory: the study of how people behave in strategic situations. The good : cell phone service with unlimited anytime minutes and free whone. Two firms: telus, rogers (duopoly: an oligopoly with two firms) Collusion: an agreement among firms in a market about quantities to produce or prices to charge. Cartel: a group of firms acting in unison. Telus and rogers could agree to produce half of the monopoly outpit. By cooperating/ colluding the two firms can relplicate monopoly outcome and share maximized profit . Increasing output has two effects on a firm"s proftis: Output effect: if p> mc, selling more output raises profits.
