微观经济学Chapter10.pptVIP

Chapter 10 Game Theory and Competitive Strategy Why should we be concerned with game theory? What is a game and how can we clarify different games? To show how to apply the game theory into the economic analysis. Applications of the game theory in oligopoly. 10.1 Gaming and Strategic Decisions Game: Situation in which players (participants) make strategic decisions that takes into account each other’s actions and responses. Strategy: Rule or plan of action for playing a game. Payoff: Outcome of a game that generates rewards or benefits for the player. The Normal-Form Representation of a Game The players in the game; The strategies available to each game; The payoff received by each player for each combination of strategies that could be chosen by the players. The players are assumed to be economic agents in the game theory Noncooperative versus Cooperative Games Cooperative Game: Game in which participants can negotiate binding contracts that allow them to plan joint strategies; Noncooperative Game: Game in which negotiation and enforcement of binding contracts between players is not possible; The fundamental difference between cooperative and noncooperative games lies in the contacting possibilities. Static versus Dynamic Games Static Game: Game in which players simultaneously choose actions; Dynamic Game: Game in which players make strategic decisions in a sequential move. Game of Complete Information: Game in which each player’s payoff function is common knowledge among all the players; Game of Incomplete Information: Game in which some player is uncertain about another’s payoff function. 10.2 Dominant Strategy Optimal Strategy: Strategy that maximize player’s expected payoff. Dominant Strategy: Strategy that is optimal no matter what an opponent does. Equilibrium in Dominant Strategy: Outcome of a game in which each firm is doing the best it can regardless of what its competitors are doing. 10.3 Nash Equilibrium Nash Equilibrium: Set of strategies or a