20005 lecture11 Review

ECON 20005 / 316–210
Competition and Strategy
Course Review and Going Forward
David Byrne
Department of Economics
University of Melbourne

1/9

Hopefully now have a better sense of...

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How economists view the world

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That game theory plays a role in your day-to-day life

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Why incentives matter

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The importance of information

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Why governments are really worried about situations where a few firms dominate an industry (Coles and Woolworths)

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What it means when people say going to University acts as a
“signalling device”

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How to think about Collective (in)Action with climate change policies worldwide

2/9

Course Overview

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Thanks for your hard work; I’ve pushed you hard

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Recall my thoughts on getting stuck: it helps you learn

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By working through tough assignments, I’m hoping to have you “battle ready” for the final

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We’ve done a lot!

3/9

Course Overview
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Game theory basics: payo↵s, strategies, dominant strategies,
SPNE, Pure-NE, Normal/Extensive Form, Nature

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Classic game tables: Prisoner’s Dilemma, Battle of the
Sexes (Coordination), Chicken, Assurance

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Continuous games: best response functions, plotting best response functions, finding NE, mixed strategy NE

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Repeated Prisoner’s Dilemma: finite/infinite/unknown repetitions, Collusion, Grim Strategies, Tit-for-Tate

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Industrial Organisation 1: Monopoly, Cournot, Stackelberg,
Homogeneous/Di↵erentiated Bertrand

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Industrial Organisation 2: Product di↵erentiation, Ice-cream salesman, Linear City pricing game, R&D races, Rent Seeking

4/9

Course Overview
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Asymmetric Information: Cheap Talk, Adverse Selection
(Lemons/Peaches Problem, Signalling and Screening in the labour market, separating and pooling equilibrium), Moral
Hazard (Principal Agent Model, IC/PC constraints)

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Collective Action Games: Prisoner’s Dilemma, Chicken and
Assurance Games (both Game Tables and n-player models), multiple equilibria, socially optimal outcome vs. NE outcome,
Tragedy of the Commons