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The concept of a mixed-strategy equilibrium was introduced by John von Neumann and Oskar Morgenstern in their 1944 book The Theory of Games and Economic Behavior, but their analysis was restricted to the special case of zero-sum games. They showed that a mixed-strategy Nash equilibrium will exist for any zero-sum game with a finite set of ...
In microeconomics, the Bertrand–Edgeworth model of price-setting oligopoly looks at what happens when there is a homogeneous product (i.e. consumers want to buy from the cheapest seller) where there is a limit to the output of firms which are willing and able to sell at a particular price. This differs from the Bertrand competition model ...
An oligopoly (from Ancient Greek ὀλίγος (olígos) 'few' and πωλέω (pōléō) 'to sell') is a market in which pricing control lies in the hands of a few sellers. [ 1 ] [ 2 ] As a result of their significant market power, firms in oligopolistic markets can influence prices through manipulating the supply function .
Three types of oligopoly. Due to the hallmark of oligopoly being the presence of strategic interactions among rival firms, the optimal business strategy of an enterprise can be studied through the thought of game theory. Under the logic of game theory, enterprises in oligopoly market have interdependent behavior.
The emergence of oligopoly market forms is mainly attributed to the monopoly of market competition, i.e., the market monopoly acquired by enterprises through their competitive advantages, and the administrative monopoly due to government regulations, such as when the government grants monopoly power to an enterprise in the industry through laws ...
This is the case of the basic Bertrand Competition which both firms have the same marginal cost. From the figure, MSS has illustrated that there is only one unique point that both firms are going to set their price. It is the pure strategy of Nash equilibrium. C1 < C2; It means that the marginal cost of Firm 2 is higher than the marginal cost ...
Oligopoly: If the industry structure is oligopolistic (that is, has few major competitors), the players will closely monitor each other's prices and be prepared to respond to any price cuts. [8] Applying game theory, two oligopolistic firms that engage in a price war will often find themselves in a kind of prisoner’s dilemma. Indeed, if Firm ...
Oligopoly. If the two companies can agree on a price, it is in their long-term interest to keep the agreement: the revenue from cutting prices is less than twice the revenue from keeping the agreement and lasts only until the other firm cuts its own prices. [8] Effort to Purchase. If there is a difference in the effort it takes for a consumer ...