Life Is A Game Mdour

Question 1

Cournot Competition

Answer 1

• it’s an industry structure
• firms compete on quantities
• they make homogeneous products
• each firm choose a quantity to produce independently and simultaneously

—> price depend on quantity

Question 2

Nash equilibrium :

Answer 2

A stable state of a system involving the interaction of different participants, in which no participant can gain by unilateral change if strategy if the strategy of the other remain unchanged

Question 3

Prisoner s dilemma

Answer 3

Paradox on decision analysis in which two individuals acting in their own self interest pursue a course of action that doesn’t result in the ideal outcome

Question 4

Pareto optimality

Answer 4

Compare all 4 states. A state is Pareto optimal if there is no other state that would improve one s situation without harming the other

Question 5

Stackelberg leadership model

Answer 5

A model in which one firm chooses its quantity and then the other firm, knowing what firm 1has dine makes it’s choice.

—> after both have sequentially chosen their outputs, the price of the good on the market & profit are determined.

Question 6

Stacklberg model : prince

Answer 6

Find best response after knowing what market leaders does !

—> backward induction

Question 7

Bertrand model :

Answer 7

Competition through prices:
If two firms produce the same good: the firm lowering its rice below the price of the other firm take the whole market. If they charge the Same price: they split the market

Question 8

Bertrand model further explanation :

Answer 8

If my price is higher than competitors, I will lose money, I therefore permanently aim for lower price BUT the competitor thinks the same —> price war and both will end up at worst position