Microeconomics

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It is possible to have more than 1 nash equilibrium. (→ its when 2 numnber are underlined)

Different from dominant strategies equilibrium !

→I’m doing the best I can no matter what you do

→You’re doing the best you can no matter what I do

If there is no dominant strategy for 1 player, there is no dominant strategies equilibrium there is just a nash equilibrium. We use the Nash equilibrium concept to find a solution.

If there Is a dominant strategy for both players, there is a dominant strategy equilibrium. It is also a nash equilibrium.

Ex 4 a refaire / voir

PRISONER’S DILEMMA

-Why do rational actors decide to go for price war when this is not optimal from a collective point of view?

-To explain the paradox of firms going for price war, economists use the game called the prisoner’s dilemma

Prisoner’s dilemma = Game theory exemple in which 2 prisoners must decide separately whether to confess to a crime; if a prisoner confesses, he will receive a lighter sentence and his accomplice will receive a heavier one, but if neither confesses, sentences will be lighter than if both confeses.

→ The example we saw before shows a competition as a prisoner’s dilemma.

• Examples (from booklet):

- Dairy products cartel in France (2015), involving 90% of France’s yogurt makers: « The collusion was

first reported by Yoplait, which received no fines in return for exposing the cartel », p.154.

- Display panel makers cartel (2015): « Samsung avoided punishment by turning witness for the prosecution and providing the evidence that would see its fellow cartel members hit with serious fines, of the largest of which at €215 million went to LG Display », p.156.

- Banks global cartel (2014): « The second lended involvedn Royal Bank of Scotland, received immunity for revealing the existence of the first cartel to Europe’s top competition authority. It would otherwise have faced a penalty of €115m », p.158. ETC.