Oligopoly and Game Theory- Micro Topic 4.5

hey I know this mr. clipper with ac/dc econ key economic concepts in 90 seconds we're talking about oligopolies right we're talking about game theory good take a look your teacher showed you something like this with the prisoner's dilemma now I'm applying the same concept but with profit so before I start the clock take a look here's what you're looking at here's two competing firms ac/dc taxi and Clifford taxi right and there's two friends of the market therefore it's an oligopoly they got to worry about the pricing of the other guy I knew Chile interdependent but Clifford taxi has two things they can do maintain the price or lower the price ac/dc same thing maintain price and lower the price these numbers in here tell me how much their profit they're going to make all right based on what the other guys going to do in this situation the numbers on the Left our clip for taxis the numbers on the right are ac/dc taxi if that makes sense to you let's go ahead and start this up we got three questions what's a CD C's dominant strategy what's Clifford dominant strategy and what will they do they have this information what are they going to decide to do again by the way dominant strategy is the thing they're going to do regardless of what the other person does it's going to start this off in 90 seconds here we go a lot of students have a hard time with this I'm going to give you a trick here's a trick what I want you to do and I want you to put a box around clip for taxi which is the ones on the left hand side so if you put a box around these this is going to help you remember that if you're looking for Clifford taxi and you're looking at the box numbers the numbers that don't have that box are obviously ac/dc taxi let's go to these questions then what is a Z DC's dominant strategy well ACDC is the one here the ones on the right which one should they do regardless of what clipper taxi does let's find out take a look yeah different times he decides to maintain what should a CBC taxi do should be maintaining it 150 or should they get 110 well they should definitely go for 150 no doubt about it that makes sense to me good then how about if in this situation clipper taxi decides the lower which one should ac/dc do they maintain and get 120 or so they lower and get 100 120 is better right here they should lower now in both cases whether Clifford Jones Taine's on lower station definitely a CDC should maintain this is their dominant strategy that a CEC starter strategy is to maintain time now let's move on what's Clippers dominant strategy okay let's find out that one well if a CDC decided to maintain which one's better now we're looking at the red squares one for 130 all right 140 is better so this is the one thing they should do the red star red star how about if a CDC lowers right after if they lower their price which was better should they maintain get 120 or say lower and get 150 ah they should get 150 in this situation little for taxi does not have one no dominant strategy for Clifford tactic the next question is what were they going to do well take a look if your Clifford tax if you don't have a dominant strategy but you know exactly why it what a CDC is going to do you know they're going to maintain they have no incentive to go lower so they're going to maintain no doubt about it the question is would you rather take 140 and maintain or would you rather go lower and get 130 well you'd rather go 140 so the scenario is going to end them right here right pepper is going to maintain a CPC is going to maintain and we're going to end up right there that's a concept 90 seconds until next time

Channel: Jacob Clifford

Views: 382,851

Rating: 4.8847332 out of 5

Keywords: oligopoly, oligopolies, game, theory, matrix, payoff, dominant, strategy, AP, Econ, microeconomics, economics, review

Id: AOEbJF0k8vM

Length: 3min 25sec (205 seconds)

Published: Sat Nov 14 2009