Paper & Responses for CH9 Basic Oligopoly Models
Order ID 53563633773 Type Essay Writer Level Masters Style APA Sources/References 4 Perfect Number of Pages to Order 5-10 Pages Description/Paper Instructions
Game theory is the subject of this article.
What is the best approach for each participant in a finitely repeated prisoner’s dilemma?
FOR THIS WEEK’S LE, THE PROFESSOR’S RECOMMENDATIONS ARE AS FOLLOWS:
One of the most well-known themes in game theory is the prisoner’s dilemma. In this game, two agents compete in a reward game with a Nash equilibrium that discourages cooperation. We’re interested in seeing what happens if these agents play with each other repeatedly.
1. Make that you have read the relevant chapter in the textbook.
2. Review the YouTube videos for this week as well as the supplemental course materials.POST
The players in a game are individuals who make decisions. The firms (or, more correctly, the firms’ managers) are the actors in an oligopolistic market with two firms, each of which must make a pricing decision (Michael & Jeff, 2016). The players’ decisions are referred to as strategies. The earnings or losses that come from the tactics are the pay-offs to the players. Because of interdependence, a player’s payoff is determined not just by his or her own strategy, but also by the strategies of other players.I can give you an example from my own life. At work, I considered taking someone to HR, and I was aware that the other person had been discussing taking me to HR. I was too busy and afraid to take her to HR, so she took me instead.
I got screwed, despite the fact that I had done nothing nearly as bad as she had (sexual harassment, telling me I need to get laid, bullying, etc.).
So, according to game theory dominant strategy, I should have taken her to HR. It would have canceled out that way.
The book was hurled at me.
Now, for each player, here is the best strategy:
1. Everyone in the game will act in their own best interests.
2. You must predict what the other player will do in order to make a counter-move.
3. How the other player moves or acts will have an impact on each player’s actions.
If I’m in the oil business, for example:
1. When prices are high, my competitors will aim to maximize or grow their profit by raising volume or cutting prices when there is an overstock.
2. If I decide to maintain a high oil price and sell at that price. To steal earnings, my opponent will undercut my price (Biglaiser & DeGraba, 2001).
3. As a result, I’m going to match my competitor’s oil price. “I’ll be in equilibrium” if I match the price cut on oil, but if I decrease my price more than my opponent, I’ll lose more money than if I only match the price cut.References
Gary Biglaiser and Patrick DeGraba (2001). Downstream Integration by a Bottleneck Input Supplier With Wholesale Prices That Exceed Costs. 30215 in RAND Journal of Economics, vol. 32, no. 2.Jeff Prince and Michael R. Baye (2016). McGraw-Hill, 9th edition, Managerial Economics and Business Strategy Hill Irwin (Hill Irwin)
POST 2 The Prisoners’ Dilemma is a conundrum in decision analysis in which two people acting in their own self-interest fail to provide an ideal result. As a result, the aforementioned parties opt to defend themselves at the expense of the other party (Baye & Prince, 2016). This paradoxical decision-making analysis is defined as a theoretical framework for understanding social situations between competing parties in order to derive optimal decision-making among autonomous and competing parties in a strategic environment.
In a finitely repeated prisoner’s dilemma, the dominant strategy is the best option for each player. In this scenario, the activities of one of the parties have no bearing on the actions of the other (Baye & Prince, 2016). To elaborate on this point, when being interrogated, the two convicts have distinct alternatives. For starters, the inmates can both remain silent and refuse to give each other up. If this occurs, both of the inmates will receive a low penalty, such as a one-year prison sentence.
Second, each inmate has the option of testifying. If one prisoner testifies while the other does not, the prisoner who testifies is released or receives a reduced sentence, while the other is sentenced to a longer term (The Economic Detective, 2013). Both sides have the option of swearing not to testify. The two parties, on the other hand, are just concerned with their own self-interest. In this light, all of the convicts’ preferred plan is to testify and either walk free without serving a term or receive a low punishment.
Even in the commercial world, the dominating strategy works best. For example, an oil firm or an airline must keep track on market prices in order to remain competitive (The Economic Detective, 2013). Their best chance of gaining a big part of the market is to lower the price to a fair level without cooperating with other firms that provide the same product or service. Their rivals would follow suit until they were on equal footing. Despite the fact that the two companies operated independently, their actions foster healthy competition.
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