1 / 25

Non-Cooperative Oligopoly

Non-Cooperative Oligopoly. “Few” Firms Product Types Identical Chapter 6 Heterogeneous Chapter 7 No Entry Firms pick price or quantity only. Non-Cooperative Game Theory. 2 or more players maximizing individual payoffs

suzannes
Télécharger la présentation

Non-Cooperative Oligopoly

An Image/Link below is provided (as is) to download presentation Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author. Content is provided to you AS IS for your information and personal use only. Download presentation by click this link. While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server. During download, if you can't get a presentation, the file might be deleted by the publisher.

E N D

Presentation Transcript

  1. Non-Cooperative Oligopoly • “Few” Firms • Product Types • Identical Chapter 6 • Heterogeneous Chapter 7 • No Entry • Firms pick price or quantity only This slideshow was written by Ken Chapman, but is substantially based on concepts from Modern Industrial Organization by Carlton and Perloff, 4th edition, McGraw-Hill.

  2. Non-Cooperative Game Theory • 2 or more players maximizing individual payoffs • Each firm is aware of the other’s decision and the way those decisions affect proft. • Nash Equilibrium • Cournot Equilibrium: Nash in quantity choice • Bertrand Equilibrium: Nash in price choice This slideshow was written by Ken Chapman, but is substantially based on concepts from Modern Industrial Organization by Carlton and Perloff, 4th edition, McGraw-Hill.

  3. Cournot Equilibrium • No entry • Homogeneous products • Single period • Demand Example: Q = 1000-1000p • Cost of firm I = .28*qi (i = 1,2) This slideshow was written by Ken Chapman, but is substantially based on concepts from Modern Industrial Organization by Carlton and Perloff, 4th edition, McGraw-Hill.

  4. Figure 6.1 P $1 MC = $.28 Residual Demand: q1 = 1000-1000P - 240 Market Demand: Q = 1000-1000P Output 480 760 1000 240 Residual Marginal Revenue This slideshow was written by Ken Chapman, but is substantially based on concepts from Modern Industrial Organization by Carlton and Perloff, 4th edition, McGraw-Hill.

  5. Reaction functions are also called: Best Response Functions Finding Firm 1’s best response This slideshow was written by Ken Chapman, but is substantially based on concepts from Modern Industrial Organization by Carlton and Perloff, 4th edition, McGraw-Hill.

  6. Finding Firm 2’s best response This slideshow was written by Ken Chapman, but is substantially based on concepts from Modern Industrial Organization by Carlton and Perloff, 4th edition, McGraw-Hill.

  7. Graphing the Best Response Functions This slideshow was written by Ken Chapman, but is substantially based on concepts from Modern Industrial Organization by Carlton and Perloff, 4th edition, McGraw-Hill.

  8. Calculating Cournot Equilibrium This slideshow was written by Ken Chapman, but is substantially based on concepts from Modern Industrial Organization by Carlton and Perloff, 4th edition, McGraw-Hill.

  9. Cournot Vs. Monopoly • For our example Demand: Q = 1000-1000pCost = .28*q This slideshow was written by Ken Chapman, but is substantially based on concepts from Modern Industrial Organization by Carlton and Perloff, 4th edition, McGraw-Hill.

  10. Cournot Vs. Competition • For our example Demand: Q = 1000-1000PSupply: P = .28 This slideshow was written by Ken Chapman, but is substantially based on concepts from Modern Industrial Organization by Carlton and Perloff, 4th edition, McGraw-Hill.

  11. Figure 6.3 Profit Possibility Frontier Cournot 57.6 32.4 Stackleberg 57.6 64.8 Efficient Point, Bertrand This slideshow was written by Ken Chapman, but is substantially based on concepts from Modern Industrial Organization by Carlton and Perloff, 4th edition, McGraw-Hill.

  12. Cournot with n-firms • Firm’s output = 720/(n+1) • Industry output = 720n/(n+1) • Price = 1/n + .28 • Profit of firm = 5.184/(n+1)2 This slideshow was written by Ken Chapman, but is substantially based on concepts from Modern Industrial Organization by Carlton and Perloff, 4th edition, McGraw-Hill.

  13. Bertrand Equilibrium • For our example Demand: Q = 1000-1000pCost = .28*q • What is demand for firm 1? This slideshow was written by Ken Chapman, but is substantially based on concepts from Modern Industrial Organization by Carlton and Perloff, 4th edition, McGraw-Hill.

  14. Stackleberg Leader-Follower This slideshow was written by Ken Chapman, but is substantially based on concepts from Modern Industrial Organization by Carlton and Perloff, 4th edition, McGraw-Hill.

  15. Stackleberg Calculations • Maximize Firm 1’s profit given that firm 2 will follow the rule: q2=360 – q1/2. This slideshow was written by Ken Chapman, but is substantially based on concepts from Modern Industrial Organization by Carlton and Perloff, 4th edition, McGraw-Hill.

  16. Multi-period Game Complexities • Simultaneous move games • Single period • Super games • Finitely repeated games • Sub-game perfection • Sequential move games • Credible strategies This slideshow was written by Ken Chapman, but is substantially based on concepts from Modern Industrial Organization by Carlton and Perloff, 4th edition, McGraw-Hill.

  17. Cournot: One Period vs Supergame Firm 1 240 180 $54.00 $57.6 240 $57.6 $72.00 Firm 2 $72.00 $64.80 180 $54.00 $64.80 This slideshow was written by Ken Chapman, but is substantially based on concepts from Modern Industrial Organization by Carlton and Perloff, 4th edition, McGraw-Hill.

  18. High Definition TV *payoff for US, **payoff for Japan This slideshow was written by Ken Chapman, but is substantially based on concepts from Thinking Strategically by Avinash K. Dixit and Barry J. Nalebuff, W.W. Norton 1991.

  19. Commitment And Credibility High effort 1*,1** Japan Low effort High effort 3*,2** US High effort 2*,4** Low effort Japan Low effort 4*,3** *payoff for US, **payoff for Japan This slideshow was written by Ken Chapman, but is substantially based on concepts from Thinking Strategically by Avinash K. Dixit and Barry J. Nalebuff, W.W. Norton 1991.

  20. The path to credibility • Establish a reputation • Write contracts • Cut off communication • Burn bridges behind you This portion of the slideshow was written by Ken Chapman, but is substantially based on concepts from Thinking Strategically by Avinash K. Dixit and Barry J. Nalebuff, W.W. Norton 1991.

  21. Reputation • Israel’s refusal to deal with hijackers • Tax amnesty & the US Congress • Mayflower Furniture “127 years without a sale” This slideshow was written by Ken Chapman, but is substantially based on concepts from Thinking Strategically by Avinash K. Dixit and Barry J. Nalebuff, W.W. Norton 1991.

  22. Contracts • Agree to penalties if you don’t follow through • Complications • Nick Russo: “$25,000 to the charity of your choice if you catch me eating in a restaurant.” • Renegotiation • http://www.stickk.com/ This slideshow was written by Ken Chapman, but is substantially based on concepts from Thinking Strategically by Avinash K. Dixit and Barry J. Nalebuff, W.W. Norton 1991.

  23. Cutting Off Communication • Death and Cecil Rhodes • Suppose that universities insist on $1.5 million to endow a chair…can endow one for less? This slideshow was written by Ken Chapman, but is substantially based on concepts from Thinking Strategically by Avinash K. Dixit and Barry J. Nalebuff, W.W. Norton 1991.

  24. Burning Bridges • Cortez burned his own ships upon arrival in Cempoalla, Mexico This slideshow was written by Ken Chapman, but is substantially based on concepts from Thinking Strategically by Avinash K. Dixit and Barry J. Nalebuff, W.W. Norton 1991.

  25. Experimental Evidence • Plott (1982) • Cournot, Competitive Equilibrium, and joint profit maximum predict price well • Which is better depends on exact setup • Lave (1962) • 2 period, 2 person, multi-period prisoner’s dilemma, no formal communication: joint profit maximum best predictor. • Holt (1985) • Tri-opoly, repeated 25 times: Outcome between Cournot and Joint profit maximum • Tri-opoly, one-shot only: Cournot Outcome closest This slideshow was written by Ken Chapman, but is substantially based on concepts from Modern Industrial Organization by Carlton and Perloff, 4th edition, McGraw-Hill.

More Related