Experts plz explain OLIGOPOLY(GAME THEORY) IN DETAIL PLZ
Dear Student,
“Oligopoly is a market structure in which only a few sellers offer similar or identical products.”
An oligopolist has to figure out the environment before computing the best output.
“Game theory is the study of how people behave in strategic situations. By ‘strategic’ we mean a situation in which each person, when deciding what actions to take, must consider how others might respond to that action.”
So, “Figuring out the environment” when there are rival firms in your market, means guessing (or inferring) what the rivals are doing and then choosing a “best response” . This means that firms in oligopoly markets are playing a ‘game’ against each other. To understand how they might act, we need to understand how players play games. This is the role of Game Theory.
Examples: –
In game trees (sequential games), the players choose paths or branches from roots or nodes.
In matrix games players choose rows or columns .
In market games, players choose prices, or quantities, or R and D levels.
In Blackjack, players choose whether to stay or draw.
Regards
“Oligopoly is a market structure in which only a few sellers offer similar or identical products.”
An oligopolist has to figure out the environment before computing the best output.
“Game theory is the study of how people behave in strategic situations. By ‘strategic’ we mean a situation in which each person, when deciding what actions to take, must consider how others might respond to that action.”
So, “Figuring out the environment” when there are rival firms in your market, means guessing (or inferring) what the rivals are doing and then choosing a “best response” . This means that firms in oligopoly markets are playing a ‘game’ against each other. To understand how they might act, we need to understand how players play games. This is the role of Game Theory.
Examples: –
In game trees (sequential games), the players choose paths or branches from roots or nodes.
In matrix games players choose rows or columns .
In market games, players choose prices, or quantities, or R and D levels.
In Blackjack, players choose whether to stay or draw.
Regards