Week 8 Flashcards
What is game theory and how is it applied to competition between firms?
Game theory is a mathematical tool used to analyze strategic decision making. It is applied to competition between firms by studying the strategic interactions and choices made by firms in order to maximize their own profits.
What is an oligopoly and how does game theory apply to it?
An oligopoly is a market structure where a small number of firms control the majority of the market. Game theory is applied to oligopolies by studying the strategic interactions between firms and the impact of their decisions on market outcomes.
How does game theory apply to Cournot and Bertrand competition?
In Cournot competition, firms choose their output levels simultaneously and game theory is used to analyze how firms respond to each other’s output decisions. In Bertrand competition, firms choose their prices simultaneously and game theory is used to analyze how firms respond to each other’s pricing decisions.
What are cartels and how does game theory apply to them?
Cartels are groups of firms that collude to fix prices and restrict output in order to maximize profits. Game theory is applied to cartels by studying how firms in the cartel make strategic decisions and the impact of those decisions on market outcomes.
How is game theory applied to electoral competition in politics?
Game theory is applied to electoral competition by studying the strategic interactions between political parties and candidates and the impact of their decisions on electoral outcomes.
What are dynamic strategic games and how do they relate to game theory?
Dynamic strategic games are games where the actions and decisions of players change over time. Game theory is used to analyze the strategic choices made by players in these games and the impact of those choices on the outcome.
What is subgame perfection and how does it relate to game theory?
Subgame perfection is a solution concept in game theory where players make their optimal choices in each subgame of a dynamic game. It is used to analyze the strategic behavior of players in dynamic games.
What are repeated games and how does game theory apply to them?
Repeated games are games where players interact with each other multiple times. Game theory is used to analyze the strategic interactions between players in these games and the impact of their choices on the outcome.
How do firms use game theory to analyze their competition with other firms?
Firms use game theory to analyze their competition with other firms by studying the strategic interactions and choices made by the other firms and the impact of those choices on market outcomes.
