【正文】 2020 Pearson Education, Inc. Chapter 12 99 Gaming and Strategic Decisions ?“ If I believe that my petitors are rational and act to maximize their own profits, how should I take their behavior into ac。2020 Pearson Education, Inc. Chapter 12 97 Gaming and Strategic Decisions ?Game is any situation in which players (the participants) make strategic decisions ?Ex: firms peting with each other by setting prices, group of consumers bidding against each other in an auction ?Strategic decisions result in payoffs to the players: outes that generate rewards or benefits 169。2020 Pearson Education, Inc. Chapter 12 95 Topics to be Discussed ?Gaming and Strategic Decisions ?Dominant Strategies ?The Nash Equilibrium Revisited ?Repeated Games 169。2020 Pearson Education, Inc. Chapter 12 92 The Cartelization of Intercollegiate Athletics ?NCAA is the cartel ?Restricts petition ?Reduces bargaining power by athletes – enforces rules regarding eligibility and terms of pensation ?Reduces petition by universities – limits number of games played each season, number of teams per division, etc. ?Limits price petition – sole negotiator for all football television contracts 169。2020 Pearson Education, Inc. Chapter 12 90 Cartels ?To be successful: ?Total demand must not be very price elastic ?Either the cartel must control nearly all of the world’s supply or the supply of noncartel producers must not be price elastic 169。2020 Pearson Education, Inc. Chapter 12 88 The OPEC Oil Cartel Price Quantity MROPEC DOPEC TD SC MCOPEC QOPEC P* The price without the cartel: ?Competitive price (PC) where DOPEC = MCOPEC QC QT Pc 169。2020 Pearson Education, Inc. Chapter 12 86 The OPEC Oil Cartel Price Quantity MROPEC DOPEC TD SC MCOPEC TD is the total world demand curve for oil, and SC is the petitive supply. OPEC’s demand is the difference between the two. QOPEC P* OPEC’s profit maximizing quantity is found at the intersection of its MR and MC curves. At this quantity OPEC charges price P*. 169。2020 Pearson Education, Inc. Chapter 12 84 Cartels – Conditions for Success 2. Potential for monopoly power ? Even if cartel can succeed, there might be little room to raise prices if it faces highly elastic demand ? If potential gains from cooperation are large, cartel members will have more incentive to make the cartel work 169。2020 Pearson Education, Inc. Chapter 12 82 Cartels ? Examples of successful cartels ?OPEC ?International Bauxite Association ?Mercurio Europeo ? Examples of unsuccessful cartels ?Copper ?Tin ?Coffee ?Tea ?Cocoa 169。2020 Pearson Education, Inc. Chapter 12 80 Price Setting by a Dominant Firm Price Quantity D DD QD P* At this price, fringe firms sell QF, so that total sales are QT. P1 QF QT P2 MCD MRD SF The dominant firm’s demand curve is the difference between market demand (D) and the supply of the fringe firms (SF). 169。2020 Pearson Education, Inc. Chapter 12 78 Price Signaling and Price Leadership ?The Dominant Firm Model ?In some oligopolistic markets, one large firm has a major share of total sales, and a group of smaller firms supplies the remainder of the market ?The large firm might then act as the dominant firm, setting a price that maximizes its own profits 169。2020 Pearson Education, Inc. Chapter 12 76 The Kinked Demand Curve $/Q D P* Q* MC MC’ So long as marginal cost is in the vertical region of the marginal revenue curve, price and output will remain constant. MR Quantity 169。2020 Pearson Education, Inc. Chapter 12 74 Price Rigidity ?With a kinked demand curve, marginal revenue curve is discontinuous ?Firm’s costs can change without resulting in a change in price ?Kinked demand curve does not really explain oligopolistic pricing ?Description of price rigidity rather than an explanation of it 169。2020 Pearson Education, Inc. Chapter 12 72 Price Rigidity ?Firms have strong desire for stability ?Price rigidity – characteristic of oligopolistic markets by which firms are reluctant to change prices even if costs or demands change ?Fear lower prices will send wrong message to petitors, leading to price war ?Higher prices may cause petitors to raise theirs 169。2020 Pearson Education, Inc. Chapter 12 70 Observations of Oligopoly Behavior 1. In some oligopoly markets, pricing behavior in time can create a predictable pricing environment and implied collusion may occur 2. In other oligopoly markets, the firms are very aggressive and collusion is not possible 169。G Pricing Problem What price should P amp。2020 Pearson Education, Inc. Chapter 12 69 Charge $ Charge $ Charge $ Unilever and Kao Charge $ Pamp。2020 Pearson Education, Inc. Chapter 12 67 5, 5 1, 10 2, 2 10, 1 Payoff Matrix for Prisoners’ Dilemma Prisoner A Confess Don’t confess Confess Don’t confess Prisoner B Would you choose to confess? 169。2020 Pearson Education, Inc. Chapter 12 65 Competition Versus Collusion: The Prisoners’ Dilemma ?We can now answer the question of why firm does not choose cooperative price ?Cooperating means both firms charging $6 instead of $4 and earning $16 instead of $12 ?Each firm always makes more money by charging $4, no matter what its petitor does ?Unless enforceable agreement to charge $6, will be better off charging $4 169。2020 Pearson Education, Inc. Chapter 12 63 Competition Versus Collusion: The Prisoners’ Dilemma ?Possible Pricing Outes: ? ?? ? 4$204)6)(2(12)6( 20 20$206)4)(2(12)4( 20 4$ 6$ $1 6 6$ :2 F i r m 6$ :1 F i r m111222???????????????????QPQPPPPP???169。 F i r m212 :d e mand s139。2020 Pe