Managerial Economics and Strategy, 2/e

Summary

1. Oligopoly Games. Interactions between firms can often be analyzed and understood using a set of tools known as game theory. Such interactions or games are particularly important in oligopolies where a small number of firms compete and hence each firm’s action affects the profits of other firms. A game in which players act simultaneously and act only once is called a static game. Games with repeated or sequential actions are called dynamic games and are analyzed in the next chapter. A combination of player strategies is a Nash equilibrium if, given that all other players use these strategies, no one player can obtain a higher profit by independently choosing a different strategy. In many games, we can find Nash equilibria by eliminating ...