MT1: Intro (GT, Bertrand & Cournot)

Question 1

Elements of a game

Answer 1

Question 2

Definition NE

Answer 2

Question 3

When does NE not lead to a pareto efficient outcome?

Answer 3

Not pareto efficient bc there exists another feasible combination of decisions under which each agent is at least as well off and some agent is strictly better off

Question 4

Does GT allow for binding agreements?

Answer 4

Question 5

Cournot model

Answer 5

Question 6

Intuition Cournot

Answer 6

Question 7

Cournot key insights

Answer 7

Question 8

Bertrand

Answer 8

Question 9

Dynamic games

Answer 9

Question 10

Establish the folk theorem

Answer 10

To establish the Folk Theorem, we show the following strategies, played by each player, form a N.E. of G ∞ for δ sufficiently high.

• Set price pm in period t , if all prices in past periods are ≥ pm .
• otherwise set p = 0 in this and all future periods

Terminology:
* Trigger Strategy
* Grim Trigger Strategy

Question 11

Trigger and grim trigger strategy

Answer 11

Question 12

Proof Folk Theorem

Answer 12

Question 13

Games with no pure strategy equilibrium

Answer 13

Question 14

Fallacy of “matching probabilities”

Answer 14

Question 15

What is p = aS/Q^b solved to Q?

Answer 15

Q= (aS/p)^(1/b)

Question 16

Negative exponent

Answer 16