# Oligopoly and Game Theory

You may have noticed the discussion in Taylor (2014) at the end of Chapter 10 about oligopoly and the prisoner’s dilemma. The prisoner’s dilemma is an example of game theory. A “game” is like a board game, as your optimal move depends on what your opponent does. The same holds in oligopoly, as your own decisions as to what price to charge or how much to produce depend on what your competitors do.

Take a look at the following video that tries to illustrate oligopoly and game theory through a Batman movie: https://www.youtube.com/watch?v=JMq059SAQXM

## Module 3 Discussion

posted May 20, 2018 1:36 PM

Hello Class,

I believe that both the Batman video and the other video I found helped explain the concept of game theory. According to Jacob Clifford (2016), game theory is the “study of strategic decision making.”

Initially, I wasn’t able to think of any situations that game theory is useful for. However, when I started to think about it, I may have an example. As my example, I am the head coach for a basketball team who is playing against their rival. Player A is the rival team’s best offensive player while Player B is my best defender. However, he isn’t a good free-throw shooter. The scenario I will use is when the game is close with a couple of minutes left in the 4th quarter. The four options are: sub Player B in when Player A is subbed in to limit his effectiveness while having the risk of being intentionally fouled to disrupt the rhythm of the team, don’t sub Player B in when Player A is subbed in to not disrupt the rhythm of the team while risking Player A to be effective, sub Player B in when Player A isn’t subbed in to bring extra defensive help while having the risk of being intentionally fouled to disrupt the rhythm of the team, or neither player gets subbed in to avoid disrupting the rhythm of the team, but sacrifice better defense.

Personally, I found the math equations/computations we’ve used in class to be easier to follow. I enjoy working with numbers so clear-cut equations are my “friends.”

References

CrashCourse. (2016, Mar. 05). Game Theory and Oligopoly: Crash Course Economics #26. [Video file]. Retrieved from https://www.youtube.com/watch?v=PCcVO