ECON101 Chapter Notes - Chapter 15: Normal-Form Game, Oligopoly, Nash Equilibrium
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Chapter 15
Oligopoly: A market structure in which:
- Natural or legal barriers prevent entry of new firms
- A small number of firms compete
Natural Oligopoly: Where natural barriers to entry result from economies of scale
and demand (the efficient scale quantity for each firm is a large portion of total
quantity demanded at minimum ATC).
Duopoly: An oligopoly market with two firms.
Interdependence: When each fir’s actios ifluece the profits of all the other
firms.
Cartel: A group of firms acting together (colluding) to limit output, raise the price,
and increase economic profit.
Game Theory: A set of tools for studying strategic behaviour, behavior that takes
into account the expected behaviour of others and the recognition of mutual
interdependence. What is a game?
- Rules
- Strategies
- Payoffs
- Outcome
Strategies: In game theory, all the possible actions of each player.
Payoff Matrix: A table that shows the payoffs for every possible action by each
player for every possible action by each other player.
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ECON101 Full Course Notes
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