Games Against the Competition
We now delve into the world of games between businesses. Of the myriad dimensions along which businesses can compete, we will discuss competition in choosing where to locate, pricing their products, by how many products they produce in the market, and by advertising.
10.1 Quantity Games: Everyone Can Win
One of the earliest, formal models that uses the logic of game theory was created by Antoine Augustin Cournot around 1838. Since Cournot was a mathematician, we will use a little bit of math in this section. He was observing two bottlers of spring water in a French town. He observed that the more spring water the two firms produced, the lower was the price that they could charge to ...