**MGT 621 – Microeconomics**

*6. Oligopoly*

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** Lecture Notes (Overheads Used
In Class)**

**Reading (Preparation)**

· Pindyck/Rubinfeld, Chs. 12—13.

**Questions (Preparation)**

· Describe the three ingredients of a normal-form
game?

· What is a Nash equilibrium of a game? Describe
its defining characteristics in words?

· Why might a Nash equilibrium not lead to an
“economically efficient” outcome?

· What are “strategic substitutes” and “strategic
complements”? How do those notions relate to the value of moving first in a
dynamic duopoly game?

· Provide an intuition for why there exists a
continuum of Nash equilibria in a Bertrand duopoly pricing game where the two
firms have different costs. Is there one Nash equilibrium that stands out over
all the others? If yes, how could the firms “coordinate” so as to implement
that Nash equilibrium rather than any other Nash equilibrium?

**Background Reading (for future reference only)**

· Fudenberg, D., Tirole, J.
(1990) *Game Theory*, MIT Press,
Cambridge, MA.