ECO101H1 Lecture Notes - Lecture 23: Delta Air Lines, Nash Equilibrium, Monopolistic Competition

• School: UTSG
• Department: Economics
• Course: ECO101H1
• Professor: zzzzzzzzz

Document Summary

Eco100y1 lecture 23 topic 12: oligopoly ii + topic 11: monopolistic competition i. Note: there have been a few things added to the oligopoly slides, save a new copy of it. Note: the phone duopoly example from last class had a non-cooperative equilibrium. Delta airlines vs united airlines. (see slides 26-27 of powerpoint. ) The choice is to cut fares by 50% or to leave fares alone. If both cut fares, each airline"s profit would be million. If neither cuts fares, their profit would be million each. If one airline cuts fares, the one which cuts fares would earn million while the other airline would only earn million. To find out which strategy the airlines will choose, draw the payoff matrix and determine the nash equilibrium. Recall the nash equilibrium each firm chooses the best strategy for itself given the strategies all others have chosen.