ECON 201 Lecture Notes - Lecture 15: Normal-Form Game, Sequential Game, Strategic Dominance
17 Sep 2016
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Document Summary
The actions of any one seller in the market can have a large impact on the profits of all the other sellers. Give rise to strategic interaction, which requires the tools of game theory. A key feature of oligopoly is the tension between cooperation and self-interest because an oligopolistic market only has a small group of sellers. Duopoly: an oligopoly with only two members. A town where two residents (jack and jill) own wells that produce water. Each saturday, jack and jill decide how many litres of water to pump, bring the water to town, and sell it for whatever price the market will bear. Suppose for simplicity that marginal cost (mc) = 0. Consider firs what would happen under our two extreme cases of market structure: prefect competition, monopoly. If the market was perfectly competitive quantity would be such that p = mc.
