AP Microeconomics / Unit 4: Imperfect Competition
4.5 Oligopoly and Game Theory
Notes
A few large firms that are interdependent.
- Payoff matrix, dominant strategy, Nash equilibrium (no one wants to change given the other's choice).
- Collusion (cartels) is unstable because each firm has an incentive to cheat.
Practice
A strategy that's best no matter what the other player does is:
Always best.
In a Nash equilibrium:
Stable outcome.
Cartels often break down because:
Incentive to cheat.
Ready for more? Take the Unit 4 test.