Game Theory Intro - The Prisoner's Dilemma as a Model for Oligopoly Behavior

[@millarhannah]

you are the biggest legend. Totally killed my micro exam today. Why do they take 2 hour lectures to explain what you can in 10 minutes-- it is straight to the point and so easy to comprehend.

[@sergioochoa9219]

I've been following your lessons since pure monopoly and may I say that you've been helping tremendously!! Thank you!

[@yamax1]

I love the way you explain this....microeconomics became the subject i started to like and it is because of You . Thanks Jason.

[@MsSamarakoon]

THANK YOU SOOO MUCH. It is sooo happy to say that I got an 'A' pass for my Micro Economics paper in my Master of financial Economics degree. I learnt all these theories clearly and perfectly because of your videos...

[@vivyyy3590]

Best explanation so far, couldn't understand from my lecture so I came here, thx!

[@FlamingBasketballClub]

Hello Mr. Welker! Great lesson on the introduction of Oligopoly. However, I would like to know the theme song used in your videos. Epic song!

[@CMVB92]

I really don't understand how you get those numbers 15M, 30M etc..?

[@LucisFerre1]

I've never heard the prisoner's dilemma described so well.

[@MegaSandman77]

Good video. Only issue I have is that the $7/$7 price would usually be thought of as a collusive price that would maximize total market profits (splitting total cartel profits of $30m). When moving from a cartel outcome by having BK drop its price to $5, the total market profits should go down (instead of up to $35m total profit between the two of them), although BK should indeed gain and McDonald's profit goes down.

[@Michelle930911]

watching this makes so hungry now

[@shairozsohail1059]

Wouldn't the lower aggregate price at 5/5 attract more buyers into the market, therby increasing demand and possibly giving both firms increased profits then at original 7/7?

[@lindanimaqetuka757]

could u please come lecture ecos at my university?

[@moreblessingchitongo5806]

He sounds better than our lecturers righy

[@rubenortiz1461]

Of course, the resource management of the equation is not present here, therefore, whoever has better logistics and cost of goods (i.e. resource management) will keep on trying to choke the other competitors, until the competitor can no longer bring its services or products lower than its competitor.

[@mannymonas]

You are way more than awesomeness itself!

[@huldaadriyannah1633]

Very nice explanation!

[@ryanbrunton9154]

either way, wendy's doesn't have a chance.

[@olivershurville]

Yeah, this point annoyed me too. Well explained... but the figures are just ridiculous. In this example, when one firm charges $5 and the other $7 the total market size jumps by $5m from $30m to £35m. This is fine if it is explained by a market increase due to the cheaper burgers from whichever company is charging $5 for a burger. However, having a market that drops to $20m in total size when both charge $5 is just ridiculous! Change $30m and $5m to something more sensible!

[@squeekycheese]

Meanwhile the local burger joint goes out of business.

[@krisives]

someone reposted this video, I suggest you send out a complain to youtube

[@gurmeetsliet]

Wonderfull'explanation

[@NnRNoAh]

I rather use Sweezy's kinked curve than game theory to explain oligopolistic behavior. The issue is that the game theory model implies that firms in an oligopolistic market structure tend to compete with price. That's far from the truth. It, of course, explains what would happen if one of the firms decides to reduce the price, but it does not show that, despite collusion being illegal, firms have the incentive to not reduce price. In this hypothetical case, for instance, firms would have decided to stay at $7. A naive student will think that oligopolies are benign, or weak, because they have to reduce price. Likewise, students who are exposed to mainstream theories without a proper critic, like perfect competition structures, will think that firms do not set prices. "They are set by the forces of supply and demand" Sweezy's model illustrates the best firms' reluctance to decrease prices, price setter power, inefficiency, desire to colude and others that these mainstream techniques will not be able to show.

[@kostas1x2]

Assuming that in the begining we start with 50/50 spilit in the market and 15/15 profits, how could we have 30/5 profits? with what split? It only works with 100/17 split and works for only in a new market 17% larger. It is correct only if you assert that the price fall will atract new consumers in the market.

[@temanokaitaua5146]

Thank you, it very helpful and clear explanation.

[@joshuahua8364]

Did anyone else think this video was going to be about Matt's Game Theory?

[@professorgaming2578]

But hey, that's just a theory... A *GAME THEORY*!

[@cloverladida1637]

THANK YOU SO MUCH! This is very helpful :) wish me luck for microeconomics test tmrowwww!

[@ivandate9972]

where the number proportion came from.... surely different proportion can change the result

[@kevtherev8194]

Therefore, they ignore game theory. Instead, they (secretly) Fix the Price - a win-win for them, a Big Loss for us.

[@Pt.GirirajSharma]

nicely explained ✌✌

[@flankspankrank]

Thank you for this, explained it well.

[@dinariperera3146]

this was so helpful =)

[@YuriTarted1337]

song?

[@doczoidberg1983]

+Ryan Hi The Rapture - Sister Saviour (DFA dub)

[@husseinmostafa4227]

With all due respect for the one who made the video. The whole idea of Oligopoly is: Firms understands that they have to cooperate to keep the market value as high as possible regardless to the customer interest. Oligopoly is keeping the price at 7$ in this example. And compensating the market demand with promotion. In simple have you ever seen McDonald prices going down?

[@paulharris8551]

More precisely, they can both make more profit if they collude than if they compete. But I'm not sure it's necessary for them to talk to each other. If each knows the other will respond to a price cut by matching it, there is no incentive to cut price unless one hopes to drive out the other by going lower than the other can go.

[@marceli1109]

You're starting to go into cartels, and Oligopoly assumes that there's competition and firms are trying to gain market share rather than cooperate to achieve maximum profits. What you said is usually the result of oligopoly.

[@abhirao4006]

Hussein Mostafa WHat you are suggesting is illegal.

[@NnRNoAh]

+Marceli Scuba No! Oligopoly assumes that firms are attentive to the decisions of other firms if collusion is illegal. Also, this model assumes that firms want to maximize profits. Given this assumptions, competition is undertake rather by advertisement (and other strategies) than price. This is Sweezy's kinked demand curve point.

[@wingbliss]

Thank you! with Gratitude.

[@zzanzare]

very nice explanation of classic game-theory prisoners dilemma. However it is lacking the final point - explaining the creation of oligopoly. If either side realizes, that the "game" is symmetrical (the decision is always the same whether you look at it from either side's point of view), it can expect that the other party will end up with the same price as us. With this in mind, Burger King will leave the price at $7, McDonald also, and they would both enjoy higher profits, screwing the customer

[@abdulwasay55]

Thanks sir.

[@456z00ts654]

This reminds me when all the fast foods were trying to do a "4 for 4" or "4 for 5" and a bunch of stuff like that!

[@vinayak186f3]

Thanks

[@LucisFerre1]

01:00

[@yidenekachewworku7744]

The market structure course i am taking is turns easy , in your awesome video lecture thanks.

[@educationguideyt]

thank you so much

[@bobbydelorisconrad]

Thank you...

[@LucisFerre1]

Don't you wish a Big Mac really looked like that?

[@kostas1x2]

Moreover in real life the firms will collide with each other in order to maximize their profits, not falling in the trap of game theory and raise the price to the point that the products market starts to shrink.

[@710418oo]

All of this made me hungry.

[@LucisFerre1]

This is why cartels tend to fall apart. The financial incentive to cheat is too great.

[@zzanzare]

in another words: /watch?v=2d_dtTZQyUM they both realize they are part of a group, then they act in the best interest of themselves *and the group* considering the strategies of others.

[@scdgjilh]

but burger king sells meals for £7 and mac Donald's for £4:(

[@saksham2779]

thanks :D

[@aneettaraj3134]

good

[@aeryx999]

Great. Now explain me how an enterprise can be successful by screwing its customers.

[@steviewonder65]

this topic doesn't seem to make sense without profit margins.

[@zzanzare]

easy, come to the czech republic and look at the mobile phone operators.. that's a classic example of oligopoly

[@Iambetter705]

Ch

[@fortuner123]

Fuck. What a verbose way of saying something very simple.

[@John.Miguel.Videos]

Too long

[@garysherwood4840]

Textbook pseudo intellectual nonsense