Active Reading Sheet for Chapter 6 Oligopoly

1. Active reading sheet for chapter 6 oligopoly Cournot 1. How can we think of oligopolies as non-cooperative games? Who are the players? What are the payoffs? p. 158 2. Name 3 elements of the oligopolistic games, p. 159 3. What is Nash equilibrium? p. 161 4. List assumptions of the Cournot duopoly. (p. 161) 5. Find a mistake in equation (6.2) in the book. 6. Describe the procedure for finding the second column in table on p.162 7. What is best-response or reaction function? (p.163) 8. Where in figure 6.3 is the monopoly output of firm 1? Information from the table on p. 162 can be helfpful 9. In which equilibrium are consumers better off and why: Cournot or cartel? (p.166) 10. In which equilibrium are the producers better off and why: Cournot or cartel? (p.166) 11. Based on Example 6.2. name several industries with highest DWL from oligopoly. 12. What is the relation between perfectly competitive market quantity, number of firms, and output per firm when firms compete in Cournot fashion? (p.171) 13. According to example 6.3 what is “disturbing” about implications of the Cournot model for mergers? Bertrand 14. What is the difference between Bertrand and Cournot competition? (p.171) 15. What is the logic behind Bertrand best response function in figure 6.5? 16. Why some economists find Bertrand more attractive than Cournot? (p.174) 17. Why is Bertrand model counterintuitive? (p.174) 18. How does capacity constrained in Edgeworth’s model reconcile Bertrand and Cournot models? (p.175-176) 19. According to Example 6.4 how often do gasoline prices change? Stackelberg 20. How is the setup of the Stackelberg model different from Cournot? (p.176-177) 21. How is the setup Stackelberg model similar to Cournot? (p.176-177) 22. What do connectors between Firm 1 and Firm 2 represent in figure 6.8? 23. How does Stackelberg price compare to Cournot and perfect competition? (p.179-180) 24. How does Stackelberg leader’s quantity compare to Cournot and perfect competition? (p.179- 180) 25. How does Stackelberg’s follower’s quantity compare to Cournot and perfect competition? (p.179- 180) Game theory 26. What are the choices that firm 1 faces in the Prisoner’s Dilemma game in figure 6.9 27. How were the numbers inside triangles in figure 6.9 calculated? 28. What is the difference between normal form representation and extensive form representation of games? (p.182) 29. Why is the Prisoner’s Dilemma called a game of imperfect information? (p.182) 30. What is a dominant strategy? (p.182) 31. Why is this game called a “Dilemma”? (p.183) 32. What is the difference between pure and mixed strategies? (p.198)