Defining Oligopoly and Game Theory
Game Theory is mathematical theory in which an individual's success in the decisions or choices he/she makes affects or changes depending on the choices of others. This theory is widely used in many different levels such as economics, politics, and more. In relation to economics, big players in the market constantly must makes choices depending on the choices other players make to be successful. In economics, an individual is only concerned about his/her outcome.
Game theory was developed to analyze competitions and to improve an individuals outcome. It has a long history dating back to the year 1938. As history progressed, game theory was later applied to many different studies and was always developing. Presently, game theory is widely known as it has been used many times in many fields.
There are some indication of game theory in the current economy. Competitions in the market are always going on and companies must always find to correct strategy to improve on their success in a widely growing economy. Most technological and phone companies must always strive to be successful by choosing the correct decisions that are affected by other competitors.
Payoff Matrix and a grid like box that determines the best to the worst possible scenarios that might happen when he/she makes a choice. It is the best way to show how game theory works and how it is able to be applied to many different fields.
Collusion is an agreement between to parties where they must cooperate for mutual benefit. Usually occurs when there is an Oligopoly in placed.
Cartel is a mixture of producers and manufactures that agree on prices they will use for selling the products. Cartels will always make more profit if a party decides to cheat on the agreement. Therefore cartels normally do not last long.
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