Internet Economics Theory of Markets (V)

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Internet EconomicsTheory of Markets (V)

• Shi-Chung Chang Yi-Nung Yang

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Outline

• Market Concentration Ratio
• Oligopoly
• Game Theory
• Prisoners Dilemma
• Duopoly Cournot Competition

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Market Structure
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Market Concentration Ratio

• ????? (??)
• ????
• ?i?????????(Si)?i?????????????????????/????
• ??????????(CR3)S1S2S3
• ??????????(CR5)S1S2S3S4S5
• ??????????????????????????
• ????
• Hirfindahl Index, H ? (Si)2 (???50?????)
• ????? Hlt1000, ????
• Hgt1800, ????, ????

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(No Transcript)
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Oligopoly

• ??
• ??????
• ?????????? ? ????
• ???? ? ??
• ????????
• ???????

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Game Theory

• ?? (??) ??
• Rules ??
• Strategies ??
• Payoff ??
• Normal form

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A Simple Game

• ??A, ??B, ????????, ????????
• (????????)

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Prisoners Dilemma

• ????
• ????????, ????????
• ??????, ?????, ?????
• ????????, ????????????? (payoff-2)
• ???????????????, ???? (payoff-1), ????????,
  ??????? (payoff-10)
• ??????, payoff -5

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Nash Equilibrium

• ????
• ?????????????
• ??????, ?????????????, ??????????
• ?????????K???, ???????H ????????H?, ??K????????,
  ? (H, K) ?? Nash equilibrium
• ???????
• ?Nash equilibrium ? (??, ??)????A??, ?????? ??,
  ?B????
• ??
• ?????MRMC???Nash equilibrium?

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Nash Equilibrium

• Formal Definition
• Roys strategy set r r1, 2, , N
• Coneys strategy set c c1, 2, , M
• Payoff for for Roy is ?R (r, c)
• Payoff for for Coney is ?C (r, c)
• if a strategy set (r, c) is a Nash equilibrium,
  then ?R (r, c)? ?R (r, c) for all r and?C
  (r, c)? ?R (r, c) for all c
• if a Strategy set (Up, Left) is a Nash
  Equilibrium, then ?11 ? ?21 and ?11 ? ?12
  (??payoff ??)

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Price War

• ?? ADSL???
• ? Nash ??????

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Standard War

• ?? 1996-1997? 56K ???????
• ????50???
• US Robotics X2, ?????25
• Rockwell56KFlex, ??????? 70

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Standard War

• ?? ?????? (?????)
• ??????????
• ??1 ??????????, ?????????
• ??2 ????????
• ??3 ?????????? gt ??????

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????????

• One-shot game
• ????
• ????????????Nash equilibrium
• Repeated games
• ?????
• ???? ????3
• PVc As PV of payoffs 3 3/(1r) 3/(1r)2.
  3 3/r
• ?A???B (B??A????), ?????????
• A??4, ??????1
• PVNC As PV of payoffs 5 1/(1r)
  1/(1r)2... 7 1/r
• IF PVC gt PVNC then ????
• 33/rgt71/r gt 1/2gtr
• IF PVC lt PVNC then ?????????
• 33/rlt71/r gt 1/2ltr

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Duopoly Cournot Competition

• Cournot Competition
• ??
• ????????, A, B
• ????
• ??????
• ?????? (?????)
• ????????????? (??), ?????? (??) ??

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Duopoly Cournot Competition

• Model
• ?A P(XAXB)XA - C(XA)
• ?B P(XAXB)XB - C(XB)
• FOCs
• P PXA - MCA0
• P PXB - MCB0
• Equilibrium (Nash)
• XA XA(XB)
• XB XB(XA)

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Cournot Competition An Example

• Market Demand P 120-2X
• Assuming MCA MCB0
• Firms Profit
• ?A (120-2(XAXB)) XA
• ?B (120-2(XAXB)) XB
• FOCs
• 120-4XA - 2XB 0
• 120-4XB - 2XA 0
• Equilibrium (Nash)
• XA XB 20
• XB XA 20
• ?????? 202040
• ???? 120 - 2X40 40
• ???????????
• Pc MC 0, Pc 120-2X 0, QC 60