【正文】 ather than simultaneously as in the prisoner’s dilemma), many outes are possible. In a repeated prisoners’ dilemma duopoly game, additional punishment strategies enable the firms to ply and achieve a cooperative equilibrium, in which the firms make and share the monopoly profit. 169。 2020 Pearson AddisonWesley Oligopoly Games The equilibrium for this Ramp。D. 169。D, Nokia’s best strategy is to do Ramp。 2020 Pearson AddisonWesley If Apple does Ramp。 2020 Pearson AddisonWesley An economic game of chicken can arise when Ramp。D game in the market for disposable diapers. Oligopoly Games 169。 2020 Pearson AddisonWesley Other Oligopoly Games Advertising and Ramp。 2020 Pearson AddisonWesley Gear’s view of the world 169。 2020 Pearson AddisonWesley The Payoff Matrix ? If both ply, each firm makes $2 million a week. ? If both cheat, each firm makes zero economic profit. ? If Trick plies and Gear cheats, Trick incurs an economic loss of $1 million and Gear makes an economic profit of $ million. ? If Gear plies and Trick cheats, Gear incurs an economic loss of $1 million and Trick makes an economic profit of $ million. Oligopoly Games 169。 2020 Pearson AddisonWesley For the plier, ATC now exceeds price. For the cheat, price exceeds ATC. Oligopoly Games 169。 2020 Pearson AddisonWesley The firms maximize economic profit by producing the quantity at which MCI = MR. Oligopoly Games 169。 2020 Pearson AddisonWesley The strategies that firms in a cartel can pursue are to ?Comply ?Cheat Because each firm has two strategies, there are four possible binations of actions for the firms: 1. Both ply. 2. Both cheat. 3. Trick plies and Gear cheats. 4. Gear plies and Trick cheats. Oligopoly Games 169。 2020 Pearson AddisonWesley Part (a) shows each firm’s cost curves. Part (b) shows the market demand curve. Oligopoly Games 169。 2020 Pearson AddisonWesley Equilibrium 169。 2020 Pearson AddisonWesley Bob’s view of the world 169。 2020 Pearson AddisonWesley Strategies Strategies are all the possible actions of each player. Art and Bob each have two possible actions: 1. Confess to the larger crime. 2. Deny having mitted the larger crime. With two players and two actions for each player, there are four possible outes: 1. Both confess. 2. Both deny. 3. Art confesses and Bob denies. 4. Bob confesses and Art denies. Oligopoly Games 169。 2020 Pearson AddisonWesley Small Number of Firms Because an oligopoly market has only a few firms, they are interdependent and face a temptation to cooperate. Interdependence: With a small number of firms, each firm’s profit depends on every firm’s actions. Temptation to Cooperate: Firms in oligopoly face the temptation to form a cartel. A cartel is a group of firms acting together to limit output, raise price, and increase profit. Cartels are illegal. What Is Oligopoly? 169。 2020 Pearson AddisonWesley In some markets, there are only a few firms pete. For example, puter chips are made by Intel and Advanced Micro Devices and each firm must pay close attention to what the other firm is doing. How does petition between just two chip makers work? When a market has only a small number of firms, do they operate in the social interest, like firms in perfect petition? Or do they restrict output to increase profit, like a monopoly? The models of perfect petition and monopoly don’t predict the behavior of the firms we’ve just described. To understand how these markets work, we need the richer models. 169。 2020 Pearson AddisonWesley 169。 2020 Pearson AddisonWesley In part (b), there is a natural oligopoly market with three firms. A legal oligopoly might arise even where the demand and costs leave room for a larger number of firms. What Is Oligopoly? 169。 2020 Pearson AddisonWesley Each is told that both are suspected of mitting a more serious crime. If one of them confesses, he will get a 1year sentence for cooperating while his acplice get a 10year sentence for both crimes. If both confess to the more serious crime, each receives 3 years in jail for both crimes. If neither confesses, each receives a 2year sentence for the minor crime only. Oligopoly Games 169。 2020 Pearson AddisonWesley Oute If a player makes a rational choice in pursuit of his own best interest, he chooses the action that is best for him, given any action taken by the other player. If both players are rational and choose their actions in this way, the oute is an equilibrium called Nash equilibrium—first proposed by John Nash. Finding the Nash Equilibrium The following slides show how to find the Nash equilibrium. Oligopoly Games 169。 2020 Pearson AddisonWesley Art’s view of the world 169。 2020 Pearson AddisonWesley An Oligopoly PriceFixing Game A game like the prisoners’ dilemma is played in duopoly. A duopoly is a market in which there are only two producers that pete. Duopoly captures the essence of oligopoly. Cost and Demand Conditions Figure on the next slide describes the cost and demand situation in a natural duopoly. Oligopoly Games 169。 2020 Pearson AddisonWesley Collusion Suppose that the two firms enter into a collusive agreement. A collusive agreement is an agreement between two (or more) firms to restrict output, raise the price, and increase profits. Such agreements are illegal in the United States and are undertaken in secret. Firms in a collusive agreement operate a cartel. Oligopoly Games 169。 2020 Pearson AddisonWesley The cartel’s marginal cost curve is the horizontal sum of the MC curves of the two firms and the marginal revenue curve is like that of a monopoly. Oligopoly Games 169。 2020 Pearson AddisonWesley One Firm Cheats on a Collusive Agreement Suppose the cheat increases its output to 3,000 units. Industry