MG_L1 Flashcards
What is the focus of this course?
Markets and Games explores:
* Game-theoretic models of market behaviour
* How economic insights guide market regulation
* Core ideas in competition (antitrust) law
Why are markets important?
They underpin:
* Living standards and quality of life
* Economic development
* Political stability
What is antitrust law?
A set of regulations aimed at:
* Limiting market power of dominant firms
* Ensuring fair competition
* Preventing collusion and monopolistic practices
How have US antitrust perspectives changed over time?
1960s:
* Very stringent anti-merger stance
* Mergers increasing concentration were presumed illegal
1970s onward:
* Shift towards consumer welfare emphasis
* More lenient view if mergers yield efficiency gains
What are economic models, and why are they used?
They are:
* Simplified (often mathematical) descriptions of reality
* Used to highlight key incentives and possible outcomes
* Sometimes seen as fables illustrating critical insights
Why do economists use unrealistic assumptions?
Because:
* It focuses on the crucial elements of a problem
* Omits irrelevant details for clearer predictions
* Helps emphasise fundamental trade-offs
How can game theory be viewed as positive rather than normative?
Game theory:
* Tries to predict what will happen (positive analysis)
* Does not dictate what should happen (normative stance)
* Is about rational strategies and outcomes
What is the economist’s role in shaping policy?
According to some views:
* Provide general principles and frameworks
* Clarify how to achieve certain goals
* Avoid prescribing what should be done (normative)
What does rationality mean in game theory?
Rationality implies:
* Agents choose best actions given their information
* They anticipate other agents’ strategies
* Equilibria emerge from these strategic interactions
What is double marginalisation in vertical mergers?
It refers to:
* Each stage in a supply chain adding its own markup
* Causing higher overall prices for consumers
* Vertical merger may remove it, but also risk foreclosure
(e.g., firm M + R1 might block R2)
