ECON 1116 Lecture Notes - Lecture 13: Nash Equilibrium, Oligopoly, Game Theory
3 Mar 2016
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Document Summary
Oligopoly a market structure in which only a few sellers offer similar or identical products. Nash equilibrium: is a concept of game theory where the optimal outcome of a game is one where no player has an incentive to deviate from his or her chosen strategy after considering an opponent"s choice. Game theory: the study of how people behave in strategic solutions. Both firms would be better off to stick to the cartel agreement. But each firm has an incentive to renege on the agreement. It is difficult for oligopoly firms to form cartels and maintain their agreements. The police have caught a and b two suspected bank robbers but only have enough evidence to implicate one. The police question each in separate rooms offering the following deal. If you confess and implicate your partner you go free. If u don"t confess and your partner implicates you, you get 20 years. If you both confess each gets 8 years.
