Lecture 4. Strategic Interaction Game Theory Pricing in Imperfectly Competitive markets. Game Theory. Tool used for analyzing multiagent economic situations involving strategic interdependence. How Do We Describe a Game?. A game is described by: number of players/agents
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Pricing in Imperfectly Competitive markets
Price competition results in price equal marginal cost for all firms and zero profits
-when demand is large relative to capacity
-when capacity is more difficult to adjust than price
-when demand is small relative to capacity
-when capacity is easier to adjust than price