ECO100Y5 Lecture Notes - Lecture 23: Petro-Canada, Normal-Form Game, Strategic Dominance
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ECO100Y5 Full Course Notes
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Lecture #23 - oligopoly and game theory compete. Oligopoly - a market structure in which a small number of firms. Game theory - the study of how people (firms) make decisions in situations where attaining their goals (desired profits) depends on their interactions with others (their interactions with other firms). Strategies set of actions players can employ to attain. Payoffs results of the interactions among players their objectives strategies. Duopoly a market where 2 competitors exist. Suppose we have two gas stations both located at an exit. Each gas station can choose to set a high price (h) or a low price. 70 kilometers from any other gas stations. (l). Payoff matrix shows the payoffs from every possible combination of strategies. 2 million (1st payoff), 2 million (2nd payoff) Nash equilibrium when each firm"s strategy is their best response given the strategy chosen by the other firm.
