Competing in Tight Oligopolies: Pricing Strategies
In recent decades, economists have employed the applied mathematical tools of game theory to try to capture the dynamics of oligopoly markets. The initial research papers are generally abstract and very technical, but the acquired insights of some of this research have been presented in textbooks geared to nontechnical readers.2 Game theory is outside the scope of this text, but we will consider some of the insights gained from the application of game theory in discussions about strategy in this and the following sections.
In this section, we will consider the economics underlying some of pricing strategies used by firms in monopolies and tight oligopolies.
- Deep discounting. One exercise of ...