Why parties to cartels cheat | Game theory and Nash equilibrium | Microeconomics | Khan Academy

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Why duopolists would benefit to form a cartel and why it makes sense for them to cheat
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Microeconomics on Khan Academy: Topics covered in a traditional college level introductory microeconomics course
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[@JasonWelker]

It's more likely that when one firm cheats, the other will as well; so each firm will face a highly inelastic demand curve below the original cooperative price and quantity of $10 and 25 units each. If the competitor matches a price decrease, neither firm will gain much market share and total revenues and profits will decrease for both firms. The incentive, therefore, is to cooperate and maintain the original price. This is what the kinked demand curve model illustrates.

[@jasonshi8315]

Thank you for making this video!!

[@lanniu8435]

Thank you so much!! Totally make sense now

[@rlipso2434]

It's interesting, I get it yet I don;t get it at the same time (probably because I have no idea how economics work) but he explains it so well that it's easy to understand at the same time.

[@ehcelikok2267]

lol, It might be a little difficult to grasp if you dont know what the individual lines represent.

[@keno1069]

I am embarrassed to say that I have a bachelor's in business, graduated with a 3.5 gpa, and have no idea what he is talking about. This is all new to me. I got a lousy stinking piece of crap education. I'm learning more from Sal than I did in college.

[@nezukochannn9062]

ths helpful when it come in study

[@mandlamabika599]

Thanks...Really helped me a lot

[@andersdammensgard7257]

Is this what xbox and playstation are doing? They essentially have a duopoly when it comes to consoles and are on purpose causing stock shortages to manipulate pricing and earnings? Same thing might be said about Nvidia and Amd when it comes to stock shortages of their new graphics card? What do you think?

[@startuphub4097]

I wonder if some people unfamiliar with how revenue curves work will understand how these supply/demand curves work from this presentation. The labels for the lines which he calls curves are not being explained properly to make sense of this for people unfamiliar with the basics of business and economics.

[@3snoW_]

However, when a firm changes their quantity to 35, does the price change instantaneously? Because if not, one could argue that for a short period of time they'd still be selling it for 10$ and so one firm would still be doing 250$ and the other would be doing 300$. Also, do the marginal cost and the average total cost curves change over time? If you can predict those changes, won't it affect your decision?

[@tiffanygriesbach6753]

Economic models are just models :) They're not always perfect and variations and error in the real world exist

[@3snoW_]

@MeesTheSame Yes, it's a model, I guess I'm asking how can you improve this model to better reflect these points

[@kravenofspider]

seems like it would apply to quality as well in some form

[@iPhone3GSCase]

nice

[@bookey80]

I believe there are some errors. In the case of non-equal share of the market (one party is cheating), average total cost is not just 2 times fatter (for example one produces 0 as an extreme case). Also for cheating scenario, average total profit of 8$/unit is for 60 units total, and company can get 8$/unit if it produce (lets say) 30 units. The cheating party is producing 35 units, (ATC@35units < ATC@30units), thus getting more than 8$/unit, while non-cheating is getting less then 8$/unit.

[@akankshasharma7498]

Mannnn.... I want to study game theory, have no background in economics. Is there a way out?

[@InCaseofEconStruggles]

There are a ton of good youtube channels on game theory that assume no background and teach game theory, this one included!

[@kONEzzer]

Once you understand this though doesn't it just seem...obvious?

[@NewOrleansboii]

LOL.. I though he meant the Mexican Cartel

[@ahmetkarakartal9563]

are you live?

[@rolloph72]

Sounds like Coke vs. Pepsi

[@ahmetkarakartal9563]

are you live?

[@JustinianLXXXII]

@Superfresh602 Fruity Pebbles?

[@ahmetkarakartal9563]

are you live?