ECON-200 Lecture Notes - Lecture 15: Non-Cooperative Game Theory, Indifference Curve, Cooperative Game Theory

• School: Diablo Valley College
• Department: Economics
• Course: ECON-200
• Professor: Sorce

Document Summary

Competition vs collusion game theory - where firms make strategic decisions firms try to get the best possible outcome/payoff. Strategy - plan for going through the game: optimal strategy - gives the best payoff. Noncooperative game - negotiation between firms not possible: no binding contracts. Competitive equilibrium >> p = mc >> zero profit. Cournot equilibrium >> reaction curves set equal. Consumer behavior, market baskets market baskets (bundles) - group of goods. How/why consumers decide how much of each good to buy. Matches up market baskets where there"s more of 1 good and less of another from the preferred basket. Market baskets above/right of curve is preferred to any basket on curve. Must slope downward (or else violates assumption that more > less) Consumer is indifferent between baskets a, b, or c, since they lie on the same indifference curve. A, b, c preferred to basket e, not as preferred as basket d.