- 266 Views
- Updated On :

Download Presentation
## PowerPoint Slideshow about 'Nash Equilibrium' - elinor

**An Image/Link below is provided (as is) to download presentation**

Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author.While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server.

- - - - - - - - - - - - - - - - - - - - - - - - - - E N D - - - - - - - - - - - - - - - - - - - - - - - - - -

Presentation Transcript

### Nash Equilibrium

Lectures in Microeconomics-Charles W. Upton

Modeling an Industry

- Competitive Industry – Many Firms
- Monopoly – One Firm
- Duopoly (Oligopoly) – A Few Firms

Nash Equilibrium

Modeling an Industry

- Competitive Industry – Many Firms
- Monopoly – One Firm
- Duopoly (Oligopoly) – A Few Firms
- Cournot
- Bertrand
- Might there be other approaches?

Nash Equilibrium

Different Problems

- A can build an expensive or cheap car.
- B can build an expensive or cheap car.
- There are four possible outcomes (E,E), (E,C), (C,E), (C,C)
- What will happen?

Nash Equilibrium

Different Problems

- Firm A can build an expensive or a cheap car.
- Firm B can build an expensive of cheap car.
- There are four possible outcomes (E,E), (E,C), (C,E), (C,C)
- What will happen?

Which, if any of those outcomes is a Nash Equilibrium?

Nash Equilibrium

Firms must end up at a Nash Equilibrium, named after John Nash

A Nash Equilibrium

Each person or firm is acting rationally

Nash EquilibriumNash Equilibrium

A Nash Equilibrium

- Each person or firm is acting rationally
- No one believes his actions will change other decisions

Nash Equilibrium

A Nash Equilibrium

- Each person or firm is acting rationally
- No one believes his actions will change other decisions
- No one has an incentive to change

Nash Equilibrium

Cournot

qA = 45 – (1/2)qB

qB = 45 – (1/2)qA

Does the Cournot model predict we will end up at a Nash Equilibrium? Yes

Nash Equilibrium

Cournot

qA = 45 – (1/2)qB

qB = 45 – (1/2)qA

- Each person or firm is acting rationally
- No one believes his actions will change other decisions
- No one has an incentive to change

Nash Equilibrium

Firm with lowest bid gets all the market.

In case of tie, firms split market

MC = 0

The Bertrand ModelDoes the Bertrand Model predict we will end up at a Nash Equilibrium? Yes

D

Nash Equilibrium

Firm with lowest bid gets all the market.

In case of tie, firms split market

MC = 0

The Bertrand Model- Each person or firm is acting rationally
- No one believes his actions will change other decisions
- No one has an incentive to change

D

Nash Equilibrium

Some Questions about Nash Equilibrium

- Nash Equilibrium is useful for studying problems where there are just a couple of players.

Nash Equilibrium

This slide left blank

Nash Equilibrium

Nash and Duopolies

- Does there have to be a Nash Equilibrium?
- Does there have to be only one Nash Equilibrium? No

Nash Equilibrium

Download Presentation

Connecting to Server..