Home > Market Structures > Raw Game Theory – Split or Steal?

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.

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  1. Simon
    April 25, 2012 at 10:37 pm

    Nick bullied Ibraham into choosing split. That strategy was high risk. It worked only because Ibraham is an extremely nice guy. He basically accepted that Nick would not choose split and that he must trust that he would actually split the money afterwards. Or thought it better that someone got the money rather than no one. At any rate he believed Nick. I would have not believed him and I would have chosen steal merely to deny him the money. I would definitely do business with Nick again but would not go near Nick. Nick is a liar. Interestingly it turns out that Ibraham has a yacht to spray whereas I suspect Nick may not be so successful.

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