A duopoly is a market where there are two sellers. In this video, we examine Cournot Duopolies, where sellers compete by setting prices. In this video, we show how to solve for the equilibrium in a Cournot Duopoly.
A Cournot duopoly is an economic model used in game theory to analyze the strategic interaction between two firms operating in the same market. In this model, each firm independently chooses its own quantity of production with the goal of maximizing its profit, taking into account the quantity produced by the other firm. The firms assume that the other firm's quantity remains constant when making their production decisions. The market price is determined by the total quantity supplied by both firms, and each firm's profit depends on its production quantity, the market price, and its cost structure. The Cournot duopoly model provides insights into how firms strategically compete by setting their production levels, considering the potential reactions of their competitors. (Assisted by ChatGPT.)
Chapters:
0:00 Introduction
1:42 What is a Cournot Duopoly?
4:09 Graphical Example
5:58 Solving for the equilibrium in the Cournot Duopoly
2:23 The Prisoner's Dilemma Game
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Description of game theory from Chat GPT:
Welcome to our exciting journey into the fascinating world of game theory! Game theory is a powerful and thought-provoking branch of mathematics and economics that examines strategic decision-making in interactive situations. In this series, we will explore how individuals, businesses, and even nations make choices and act in various scenarios where the outcome of their decisions depends not only on their own choices but also on the choices of others.
Game theory delves into the complexities of human behavior, offering valuable insights into conflict resolution, negotiations, and cooperation. It provides a framework to analyze situations where players have conflicting interests and must carefully weigh the potential outcomes of their actions. From classic examples like the Prisoner's Dilemma to more advanced concepts like Nash equilibria and extensive-form games, we will break down these intriguing concepts and explore how they apply to real-life situations. Whether you're a curious learner or an aspiring strategist, this series will equip you with the tools to better understand the dynamics of decision-making and the strategies that drive the world around us. So buckle up and get ready to explore the captivating world of game theory!
