ECON 1051 1nd Edition Lecture 35 Outline of Last Lecture I. Monopolistic CompetitionII. Differentiating Your Product III. Defending a Brand NameIV. Oligopoly V. Barriers to Entry Outline of Current Lecture I. Game Theory a. Definitionb. Three Key Characteristics c. Business Strategy d. The Game Current LectureI. Game Theory a. Definitioni. The study of how people make decisions in situations in which attaining their goals depends on their interactions with othersii. In economics, the study of the decisions of firms in industries where profits of a firm depends on its interactions with other firms b. Three Key Characteristicsi. Rules that determine what actions are allowableii. Strategies that players employ to attain their objectives in the gameiii. Payoffs that are the results of interactions among the players’ strategies 1. The payoffs are the profits a firm earns as a result of how its strategies interact with the strategies of other firms c. Business Strategy i. Actions that a firm takes to achieve a goal, such as maximizing profit d. The Game:i. Analyze the competition between Apple and Samsung These notes represent a detailed interpretation of the professor’s lecture. GradeBuddy is best used as a supplement to your own notes, not as a substitute.Choose $700 (Apple) Choose $600 (Apple)Choose $700 (Samsung) A: $10 million profitS: $10 million profit A: $20 millionS: $5 millionChoose $600 (Samsung) A: $5 millionS: $20 millionA: $8 millionS: $8 million ii. Rule:1. CEOs have to make decisions at the same time a. Don’t know what the other company is going to do before they make their decision2. Apple’s strategy is dominant strategy (to pick the low price): a. If Samsung picks a high price, Apple would want to pick a low price b. If Samsung goes with the low price, Apple would want to try and match the
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