tailieunhanh - Lecture Microeconomics (20/e): Chapter 13A - Campbell R. McConnell, Stanley L. Brue, Sean M. Flynn

Chapter 13A - Additional game theory applications. This appendix provides additional examples of oligopoly-based examples of game theory. Game theory explains mutual interdependence and strategic behavior. | Additional Game Theory Applications Chapter 13A Copyright © 2015 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education. This appendix provides additional examples of oligopoly-based examples of game theory. Game theory explains mutual interdependence and strategic behavior. A One-Time Game: Strategy and Equilibrium A one-time game A simultaneous game A positive-sum game Zero-sum game Negative-sum game A firm’s dominant strategy LO10 We begin by examining a one-time simultaneous positive sum game. A one-time game means that firms make their decisions in a single time period. A simultaneous game means that firms make their decisions simultaneously. A positive sum game means that the sum of the two firms’ outcomes is positive, a win-win situation. A zero sum game is a game in which the sum of the two firm’s outcomes is zero, an I win-you lose situation. A negative sum game means the sum of the outcomes . | Additional Game Theory Applications Chapter 13A Copyright © 2015 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education. This appendix provides additional examples of oligopoly-based examples of game theory. Game theory explains mutual interdependence and strategic behavior. A One-Time Game: Strategy and Equilibrium A one-time game A simultaneous game A positive-sum game Zero-sum game Negative-sum game A firm’s dominant strategy LO10 We begin by examining a one-time simultaneous positive sum game. A one-time game means that firms make their decisions in a single time period. A simultaneous game means that firms make their decisions simultaneously. A positive sum game means that the sum of the two firms’ outcomes is positive, a win-win situation. A zero sum game is a game in which the sum of the two firm’s outcomes is zero, an I win-you lose situation. A negative sum game means the sum of the outcomes is a result less than zero. When a firm has a dominant strategy this means that the firm has an option that is better than any alternative option regardless of what the other firm does. A One-Time Game: Strategies and Equilibrium Nash equilibrium Outcome from which neither firm wants to deviate Current strategy viewed as optimal Stable and persistent outcome LO10 A Nash equilibrium is described as where rivals see their respective current strategy as the optimal choice, given the other firm’s strategy and is the only outcome that is considered stable and that will persist. If the outcome is not at the Nash equilibrium, then the firms will continue to modify their strategies until they reach the Nash equilibrium. Dramco’s price strategy Chipco’s price strategy A B C D $11 $11 $5 $20 $17 $17 $20 $5 International International National National 2 competitors 2 price strategies Each strategy has a payoff matrix Independent actions stimulate a response A One-Time Game LO10 In .