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Game Theory and Oligopoly - CrCo > .23-8-13 Game Theory Of Military Spending | EcEx > .
● Economic Principles ..
1- 4 types of markets
A- Perfect competition
Low barriers, identical products, no control over price (eg strawberries)
B- Monopoly
There is one large company that produces a product with few substitutes. And because high barriers prevent competition, a monopoly has a lot of control over price.
C- Monopolistic competition
a market with many producers and relatively low barriers; their products are very similar but not identical. (eg furniture stores or fast food)
D- Oligopolies
markets that have high barriers to entry and are controlled by a few large companies. Similar to monopolistic competition, their products are similar but not identical. That gives them some control over their prices. How?
A- Perfect competition
Low barriers, identical products, no control over price (eg strawberries)
B- Monopoly
There is one large company that produces a product with few substitutes. And because high barriers prevent competition, a monopoly has a lot of control over price.
C- Monopolistic competition
a market with many producers and relatively low barriers; their products are very similar but not identical. (eg furniture stores or fast food)
D- Oligopolies
markets that have high barriers to entry and are controlled by a few large companies. Similar to monopolistic competition, their products are similar but not identical. That gives them some control over their prices. How?
2- Non-price competition:
Companies focus on things like style, quality, location, or service. The goal is to distinguish their product from their competitors.
The most recognizable form of non-price competition is advertising.
Companies focus on things like style, quality, location, or service. The goal is to distinguish their product from their competitors.
The most recognizable form of non-price competition is advertising.
3- Game theory: the study of strategic decision making.
4- Collusion: If businesses don’t compete at all and they agree to charge the same high price, conspiring to form what economists call a cartel. They split the customers 50/50, but now they make even more profit -- benefiting at the expense of consumers. It’s illegal in the US.
5- Price leadership is when one company changes its prices, and its competitors have to decide if they’re going to follow suit.
6- Pay off matrix: In game theory, a payoff matrix is a table in which strategies of one player are listed in rows and those of the other player in columns and the cells show payoffs to each player such that the payoff of the row player is listed first.
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