Raw Game Theory – Split or Steal?
I got this clip from a tweet by Mo Tanweer of Oundle School in the UK. For those studying market structures it is a mistake to believe that ALL oligopolists face a KINKED DEMAND CURVE. Oligopolists may either:
a) COMPETE VIGOROUSLY or
b) COLLUDE (e.g. in cartels) or
c) PLAY SAFE (as in Kinked Demand Curve Theory)
In recent years game theory has become a popular way of examining the strategies that oligopolists may adopt in a market. Game theory involves studying the alternative strategies oligopolists may choose to adopt depending on their assumptions about their rivals’ behaviour. This clip is game theory in its rawest form. Very entertaining and a worth a look.