1. Game Theory

2. What a "Game" means in Game Theory. Rivalry is direct. In "Zero-Sum" games you win just what the other guy loses. Economic market games are often non-zero sum. Noncooperative often. Oligopolistic.

3. Who needs to study Game Theory? We will do two-person games in this course.

5. Nash Equilibrium: A set of strategies such that each player believes accurately that he is doing the best he can given the strategy of the other player.

6. Nash as a young man Nash as a Nobel Prize Winner The book and the Oscar-winning movie.

9. Cournot Oligopoly: This historical first oligopoly model has the nature of a modern game theoretic game.

10. Cournot Duopoly example: Carpenter & Hannover

11. Hypothetical: Hannover increases to 100 units.

12. Hypothetical: Hannover produces 200 units.

13. Reaction Curves for Hannover & Carpenter

14. Applications of Game Theory outside of economics: Prisoner's Dilemma MAD our historical Cold War policy on nuclear attack missiles and our defensive system.

16. Does Cheating Pay?

17. Most-favored Customer Policies.

18. Before Most-favored Customer Clause

19. After Most-Favored Customer Clause

20. Lecture and discussion topics: Oligopolistic Rivalry The Importance of Commitment Preempting Potential Rivals When Is A Threat Credible?

21. The Importance of Entry Deterring Entry. (DuPont Case discussion) Advertising to Resist Entry (Folgers Case discussion) Preemptive Strategies: (Wal-Mart Case next slide)

22. Walmart Case: Preemptive strategies.