Chapter 4: The strategic firm

Pages Contents
80-110Conventionally, strategic firms are described by various oligopoly theories all of which share a common attribute: because there are only a few competing firms in a market, all rivals recognise that they are mutually dependent upon each other. In other words, a firm's profit depends on its own actions as well as the actions taken by competing firms in the market [for more on strategic thinking and oligopolies see, among other, Mas-Colell et al. (1995), Baye and Beil (1994) and Kohler (1990)]. Consider some examples based on a two-seller (duopoly) market structure.
1 Kinked-demand mentality
2 Reversed-kinked-demand mentality
3 Dominant strategy
4 Nash equilibrium
5 Cartel solution
6 Games with mixed strategies
7 Incomplete information games
7.1 Pure-strategy Bayes-Nash equilibria
7.2 Mixed-strategy Bayes-Nash equilibria
8 Evolutionary games
9 The Cournot model
9.1 N-firm Cournot model
9.2 Industry concentration measures
9.3 Cournot duopolists
10 Stackelberg duopolists
11 Live and let live philosophy
12 Stochastic duopoly
13 A case for more competition and higher prices
14 Entry deterrence
14.1 The Sylos-Labini postulate
14.2 The Dixit model of entry deterrence
15 Summary

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