Okay. Good
afternoon, everyone. Firstly, Zach. Congratulations for
winning the game. What was your guess
again? 26. 26. So I think the guess,
two-thirds of the average guess of the
game we played was around 26, which means the
average was like 34 or 35. I specified it
in the email for you. So it's kind of similar
to what we looked at in terms of the
actual data. And the other two classes
were quite similar as well, where the winning
guess was between 22 and 28 and the actual
average was between like 30 and 40. Now
there was a couple people in age class
who put 100 which like significantly
increased the average but overall most people
were playing these k-level strategies
that we talked about. So at the end come up to me and we'll get a prize. A little bit of
housekeeping. So we're going to finish the game
theory lecture today, do the Kahoot quiz and
make a little bit of a start on the oligopoly
lecture um i don't want to get too far
into it because we don't have class on friday
so no class no office hours you can do with
that time whatever you want um on sunday
the next homework which is on game theory
theory is meant to be released if i have it
ready before i'll release before like i usually
do and you'll have um until the following
sunday to to get that done um and yeah i
think that's all i have yeah if any of you
are from chicago and have any recommendations
about things to do. I'm not going to
offer you extra credit, but I'd
appreciate it if you told me about
those things. So before we get back
to where we finished last time, I do want to
make a quick point on this idea of sub-game
perfect Nash equilibria. So if you remember
the definition of a sub-game perfect Nash
equilibria is that in every sub-game that
you're playing the Nash equilibria and as we
can see in a game like this we have two sub
games the first sub game is at this second
node here where player two decides between left
and right we can see that left is is the
Nash equilibria in this sub game because for
player two one is greater than zero so they'll
choose left and the entire game itself
is a sub game at the following node up here
that encompasses all the other sub games so
here going up then left is going to be the
sub game perfect Nash equilibria because in
this full game if you choose up then player
two will choose left over the right and that's
something we discussed however something that
I didn't really make clear is that there
is actually another Nash equilibria here
but it's not sub game perfect so player two if
they say to player one if you go up i'll go
right not left i'll punish you and and it
will cost me as well then as a result player
one chooses down under the assumption that if
they go up player one will choose right this
is actually a Nash equilibria it's not sub
game perfect but it's a Nash equilibria and
that's because player one is doing the best
they can given that they believe if they
choose up play one will choose right so this
is on the equilibrium path and this is off
the equilibrium path and if you're off the
equilibrium path you can have beliefs that sustain
an actual equilibrium but as we know this
threat of saying if you go up i'll play
right is not credible and if something's not
a credible threat it's not going to be sub
game perfect so So, remember our definition
of subgame perfect is it has to be a Nash
equilibria at each node. Choosing right here is
not a Nash equilibria at this node, it's
choosing left. And as we said, it's not
a credible threat. So, that's the
difference between a Nash equilibria and a
subgame perfect. You can specify any beliefs
that don't actually happen, that would
happen off the path, that actually
sustain an outcome. That can be a Nash
equilibria. but if those beliefs off the path
aren't credible, it's not going to
be sub-game perfect. The reason why I
wanted to focus on this is not so much for
this course, but I was looking at the
homework questions written by McGraw-Hill,
and they do have a question about this,
so I just thought I'd make sure that I
covered it properly, just so you know what's going on in that regard. Okay, and then finally, for the last
time in a while, Can I get two volunteers? Yeah, Daniel. Ivan, you've had a
go already, yeah? I did the push-ups. Oh, you did push-ups. Yeah, come up
here as well. And you do
volunteer after all. No one likes three
musketeers, eh? Yeah, great. So, Daniel, Ivan here.
And this is how it's going to work. So, we
have our two players. Ivan, you're player
one. Daniel, you're player two. player
one is going to start with six pieces of
candy here so you start with this Ivan and you
can offer any split between you and Daniel
that you want so you can offer him
nothing you can offer him one two three
four five six whatever after he makes his
offer Daniel you have two choices you can
accept his offer and then this split is enacted
and you both get what the distribution
is or you can reject it and you both end
up with nothing you go back to your six and
don't have any candy You understand? Understand? What offer do you
want to make in? And also you can switch
the candies at the end. Don't worry
about the specific ones. It's the
number that matters. So there's six and
four, right? Yeah. Do you want to do
three and three? Sure. And are you going
to accept this offer, Daniel? I
accept it. Great. So you each get
three pieces of candy. Well done,
guys. Great job. So in the other class,
the offer was free, but the person rejected
it, which I still don't understand why,
but it does bring in some insights of
integrity. choices. So this is a very
famous game. It's called the ultimatum game.
The name being clear because Ivan, very
kind of you Ivan, Ivan gave Daniel an
ultimatum essentially. It's a yes or
no situation. So the way this
works is in the ultimatum game
the proposer is given a fixed
amount of money M. Let's say M is $10. They can offer some
portion of this $10 which we call X to
the responder and the responder can either
accept or reject the offer and they make
this decision knowing what M is, what the
initial endowment is and they know how much
they've been offered. As we saw before, if
they accept, that's what the distribution
is but if they reject, both walk
away with nothing. So here's one way we
can frame the game. I'm actually going to
ignore this for now because I don't want
zero offers because that I think confuses things.
so let's assume all offers have to be
positive then we can have something like this
so as you can see this is the game tree or the
extended form of this game the proposer if
we get rid of this zero branch here can
offer either one dollar two three all the way
up to ten and then after the offer the responder
as you can see they can either accept or
reject every time if they reject both players
get nothing and if they accept they get
what the distribution is so in this case here
if the proposer offers eight dollars and
the responder accepts the responder gets eight
dollars the proposer gets two or over here
if they offer two dollars the responder
um accepts they get two dollars and the um uh
proposer gets eight so in terms of the sub
games if we're ignoring this branch here we're
going to have 11 sub games so this is a sub
game this is a sub game this is a sub game
we're gonna have 10 of these and then the
overall game is a sub game as well so we saw what
what what Ivan did Ivan why did you decide
to offer three cool that's some cool
that's very kind of you very reasonable and a
lot of people like Ivan would offer three
in this game and And obviously, Daniel,
you'd be crazy to reject that offer, even though
that's what happened in the previous
class. I still can't wrap my head around
it. But the question I have for you is, what
is the Nash equilibria in this game? The
sub-game perfect Nash equilibria in this
game. If both players are payoff maximizing,
how should they act? Zach? In theory, the player should offer one. Why one? Because
it's the lowest amount that
the person can receive to still
benefit. Yeah. exactly that so if
we look at what the responder will do
on each branch i mean as you can
see this is obvious will they choose
accept or reject 10 is greater than zero
so they'll accept in this offer here if
i get eight dollars eight is greater than
zero they'll accept in fact if we go down
every branch they get a payoff higher than
zero if they accept and they reject they get
zero and remember players will choose the option
that gives them the highest payoff so
even if they only get offered one dollar as you
can see they can either accept and get one
dollar or reject and get nothing and because
one is greater than zero they will accept
so if we go to the the next slide as you can
see we've highlighted what decision that the
proposer sort of the respondent will make
in in each situation and using rollback
equilibria or backward induction we go to the
proposer and the proposer can see what their
payoff will be if they offer three dollars
they know if they offer three dollars the
responder will accept and they end up with seven
but looking at all of this i can see that if
they offer the lowest possible positive
amount one dollar then the responder has to
accept because they get a higher payoff from
accepting than rejecting and this maximizes
the proposer's payoff and they end up with
nine zero is a bit of a weird case and that's
why i wanted to leave it out technically
if you offer zero the respond is indifferent
between the two but i don't want you to really
worry about that just think about an
ultimatum game where the lowest possible offer
still has to be a positive sum and that is what
the proposer should offer and the responder
should accept that okay so yeah so
generally game theory the game theoretic framework
that we've started makes a clear prediction
on the outcome of the ultimatum game
if the players have a monotonic preferences
that is more is better the responder accepts any
offer that is greater than zero and possibly
even if x equals zero thus the proposer
offers the smallest amount the proposer can
offer because i know the responder will
accept it so i've got a question for you all so
imagine you're playing this ultimatum game
you're up in the lab and you've been
assigned the position of responder and the proposal
is given a hundred dollars and they can
offer amounts in one dollar increments and
they offer you one dollar and they propose
to keep 99 themselves hands up if you would
accept this offer not one taker hands
up if you'd reject yeah yeah pretty
much everyone here would reject. So
who said that would reject? Eric, you
said you'd reject? I don't know
what's going on. Sorry? I don't know
what's going on. That's fine. I can
ask someone else. Who wants to tell me
why they would reject? Michael, why
would you reject? I want more.
You want more? But you get less
by rejecting. Yeah, you get zero
if you reject. It's the end of the game. There's no second round. Would you change
your decision? no okay fair enough
yeah yeah yeah so that's a good reason anyone
else dk yes okay same reason so yeah um
there's a lot more that people take into account
than their payoffs when they go about making
decisions and i felt like just leaving you
with this is what the the national equilibrium
is in our analytical framework would not
do justice to what actually goes on so this
is a paper by cooper and dutcher in 2011
and on the y-axis here is the acceptance rate
um and if they don't accept they reject so
this is a responder and they've broken up here
into the percentage offered by the proposer
so these are percentages offered between zero
and ten percent of the pie 10 and 20 20
30 30 40 so on so forth so the key things to
notice here is if the offer is is close to
a 50 50 split or they even offer more what
you find is that the majority of people accept
the offer so similar as ivan offered daniel
50 of the pie that offer is pretty much
always accepted however as we can see here
when in between 10 and 20 of the pie are offered
this is a positive amount according to
game theory people should accept it but
here we see less than 30 of people accept these
splits. So more than 70% of people reject
it. And it's even higher, the majority
of people, like 95% of people, reject offers
between 0 and 10. And as we sort of play
out hypothetically in the classroom, this
is a very common find. So people take into
account more than just payoffs. You've got to
remember, by rejecting a positive offer,
you're essentially undertaking costly
punishment. You're reducing your own payoff to
make someone else worse off. And there are
reasons for this. One, if you don't like
inequality, this is a way to reduce inequality
and you might prefer to have nothing if
the other person has nothing compared to a
positive amount given that there's going to
be larger inequality. You might have
spiteful preferences as well. You might
be pissed off that they're not offering
you a fair amount. And also there are
other factors that can come into play.
And once we take all of these things
into account, in our models, we can actually
explain behavior in these games a lot
better than the game theoretic analysis
that we looked at before, that you
should offer the lowest amount and the responder
should accept it. So I just wanted to
add some realism to that. And the ultimatum
game has a lot of cases in the real world.
A really simple one is just bargaining for
a salary, you get a job offer, the employer
offers you a salary, you can accept the job
and get that salary, or you can reject
it and then if they don't hire you, you
don't get the salary. So a simple framework
like that can actually explain a lot in terms
of bargaining power. Finally, we have a
game called the trust game. And the way this
works is there are two players, once again,
a sender and a receiver. so both the
sender and receiver are given an initial sum m
for simplicity imagine the sender starts
with ten dollars and the receiver starts
with zero with nothing the sender can then
choose to send how much of the ten dollars they
want to the receiver any amount and whatever
amount they send gets multiplied by
k so let's say k is three here so the money
gets tripled so if they send all ten
dollars to the receiver then ten times three
becomes 30 and now they have nothing and the
receiver has 30 dollars and in the last stage
of this game the receiver can then choose
to return any amount of the money that they
have to the sender so this is what the
game looks like the sender can choose to
send nothing then they end up with ten dollars
and the receiver ends up with nothing
or they can choose to send a positive amount,
this gets multiplied by K, so multiplied
by 3, they send 5, gets turned into 15,
if they send 10, it gets turned into 30,
the receiver gets this, and then they can
choose how they want to split this
between them and the sender, so
they can choose to give any amount
back as they want. So, Ivan, you're our
pro-social person in this class. We
saw your revealed preference there.
Let's say I'm the sender, and I
send you all $10. It's multiplied by 3,
so you now have 30, and I have 0. You can
choose to distribute for 30 any way you like
between both of us. That's the end
of the game. What would you
decide to do? I would probably
split it 50-50, since you gave me a decision
to do that. Yeah, so reciprocity is
a strong preference for you there. So you
split it so it's 15 -15. And I assume
there's a lot of people thinking along those
same lines here. However, does
anyone want to tell me what the sub
game perfect national equilibrium
is in this game? Yeah? I would guess
that it would keep the person who
received, in my case it would be me, would keep
all of the money and give you zero since
you had the option to keep the money
and you already chose to know. Yeah, so
let's think about first from the responder.
so the receiving if you receive any amount
of money let's say you get five dollars
it gets turned into fifteen dollars if
you give any positive amount back to me
you're worse off than you'd be if you sent
zero so if you get if you return y you essentially
get your endowment which is zero plus
what you got from the sender times k which
is three minus what you send back and if
you return zero you just have what you
started with plus what you got you're sending
anything back so this is always going to be
a higher number than here so if you want to
maximize your payoff you should never return
anything so that's the optimal action of
the receiver so then what is the optimal
action of the sender given they have that
knowledge of how the receiver works yeah yeah
yeah whatever they send will not come back
to them so they send one dollar that dollar
is not coming back so they may as well send
nothing at all and the sub game perfect
national equilibrium in this game is that
the receiver returns nothing so the sender
sends nothing and this leads to the payoffs of
the sender having ten dollars and the
receiver zero whereas if ivan and i trusted each
other hence the trust game we would have
both ended up with 15 so this game is also
a workhorse model we use a lot in economic
experiments one is obviously to measure
different trust levels in society so you go to
different places around the world and play
this game to see how norms differ if people
are willing to send and if people are willing
to reciprocate that but also it can be
modeled in a political economy sense where
the sender is like a company that invests in
the technology to grow etc so they have these
upfront expenses but if they hit on something
then they'll have you know some either
you know idea or technology that's very
profitable but the structure of society is really
important here if you're in a democratic
society with strong institutions you will
invest in this thing you know you'll be able
to make the profits from it however a lot
of societies don't have these strong
democratic institutions and if a firm does invest
in these sort of things it becomes profitable
the government will just take it over
essentially so this helps us kind of um uh
um model um trust in society as well not you
a human to human sense but from a firm and
institution sense as well all right that's
all i have on game theory let's do a kahoot
and yeah as we get it up if anyone has any
questions um about game theory now will be
the time to ask while everyone's logging in
i spoke to i think a couple of people about
this but um so the occasion beauty contest
we played looked at this idea of k-level
reasoning and how at different levels you'd
submit different answers there's a similar game
but more competitive called the 11 20 game
where there are two players and you have to
pick a number between 11 and 20 and whatever
number you pick that's how much you get paid
so if you pick 20 you get 20 bucks you
pick 15 you get 15 bucks you pick 11 you get 11
bucks however if you pick a number that is
lower than the other player's number you
get a 10 dollar bonus. So, imagine you both
select $20, then you're incentivized
to choose $19, because if you choose $19,
you get the $19 plus a $10 bonus, which
is $29. But then the other players incentivize
to choose $18, then you're incentivized
to choose $17, all the way down until
you're both on $11, then one person is
incentivized to go back to $20, because
if you both choose the same number, no
one gets a $10 bonus. So, this is like K
level on top of k level on top of k level there
are many different strategies here um
maybe in the future we could play this
one because i think it's genuinely
interesting and i have no idea how people will
do um but yeah i thought some people here
were quite interested in the games in beauty
contest so there's a lot of k level
reasoning type of um experiments that we've
run in games okay we all ready hey let's
get started which of the following is not a necessary component
of a game players actions risk
or payoffs what do you reckon dk
are you confident no okay yeah pretty much
everyone got that right so yeah risk
isn't a part of it um you need players
in a game you need players in a game is
that an elvis hairdo there interesting
okay next question a sequential game
is when all players make their decisions
at the same time I think a couple of
softballs to start us off okay yeah
so a simultaneous game is when all
players make their decisions at the
same time sequential is when there's an
order to the game ah next question
what type of game best describes the
prisoner's dilemma cooperative
non-cooperative coordination or zero sum so yeah this is a i
think a fairly difficult one at least it was
in the previous class let's see if the
330s can do better okay great the majority
of people got that right so it's not
zero sum remember the definition of zero sum is
that one person wins it the other loses in
each quadrant it adds up to a payoff of zero
coordination is when there are multiple
equilibria cooperative is when you're trying to
work together but non -cooperative in the
case of the prisoner's dilemma is because both
players always have a dominant strategy to
defect and you end up on the Nash equilibria
which makes both players worse off and if
they cooperate it so because you always have
this incentive to defect it's non-cooperative
yeah the emojis are out in force on this
question I did have this in the slides I
probably didn't spend as much time on it as you
wanted I'll acknowledge that but yeah ah
next question a Nash equilibria is a strategy
profile where no player has an incentive to
unilaterally deviate. Hopefully this one
makes you a bit happier. Deca, how are we
feeling? Good. Great. Yeah,
this is just a definition of
Nash Equilibria. All right,
fifth question. How many pure
Nash Equilibria are there in the
Stag Hunt game? Zero, one, two, or three? Pretty much everyone
got that right. So we have our two pure
Nash Equilibria. Remember, pure means
you play an action or a strategy with
100% probability. That's the definition
of pure. We have both players
playing stag. That's our payoff dominant
equilibrium. And both playing
here, which is our risk dominant
equilibrium. If you remember the
example I gave about the exam, if no one turns
up, everyone gets 100 or something like
that. I can show how some people might
choose the risk dominant over the payoff dominant
strategy. but overall in the SAG Hunt game
there are three Nash Equilibria. You have
two pure ones but you also have the mixed
strategy Nash Equilibria as well. So the pure
here is important. We have a new leader.
Two questions left. According to
standard theory in the Ultimatum
game the responder should reject an
unfair proposal. The responder should reject an
unfair proposal. Most people got
that correct. As we said according to
standard theory any positive offer
should be accepted by the responder because
that payoff will be greater than
zero okay see who's in the lead who's
um pacifier snake right daniel have
you won one yet okay well you're up by
what 36 points let's see if you can hold
on final question if an equilibria
is sub game perfect it is a sufficient
condition for being and Nash Equilibria
true or false most people got that right
yeah this is just a definition so it's true
Daniel congratulations at the end of class
you can come up and get something I'm going
to jump into the next thing now but yeah so
I wanted to get a quick start on um oligopoly
we're not going to dive too far into it
because I don't want like a five-day break
everyone's forgotten and everything so um i'm
only going to get started so if you remember um
in the textbook they have the oligopoly
chapter before the gang theory chapter and
that's because oligopoly is our fourth market
structure we looked at um a perfect competition
monopoly monopolistic competition and this
is the other type of market structure
however unlike the other market structures so if
you're in a perfectly competitive market you
just focus on whatever the price in the
market is that's your marginal revenue and
you optimize your cost to be um so your
marginal cost is equal to the marginal revenue
that's how you optimize in a monopoly there are
no other firms so all you're doing is looking
at the demand curve in the market and
setting your marginal cost equal to the
marginal revenue based on that demand curve and in
monopolistic competition is kind of a mix of
these two however oligopoly is a bit
different to these market structures so these
market structures are characterised by only a
few firms each of which is large relative to
the total industry so everyone in their own
way is going to affect the price and the
output in the market so the typical number of
firms in oligopoly is between two and ten
the products can be identical or differentiated
and when there's only two firms this is
known as a duopoly it's known as a duopoly so for
managers the oligopoly settings tend to be
the most difficult since you don't just
have these simple optimization problems that
we talked about in the other three types of
markets your decision of pricing or the
quantity to produce has a direct impact on the
other firm's profit and the other firm's
decisions in terms of how much you produce and the
price is set is going to have a direct
impact on your profits. So this is game here. We're only dipping
our toe in the water here so we're not
getting too far into it. So, in this topic,
we're going to look at four different
models of oligopoly, and as we know in game
theories, we talked about the timing
of a game, whether it's simultaneous or
sequential, or the structure of the game
can have big differences on the outcome.
So we're going to look at four different
models that have different ways of
looking at oligopoly. So the first one and
the one we'll look at today, it's the
simplest, some weird assumption of those known
as the Swayze model. Then when we come
back next Monday, we're going to
focus on the Cournot model, which
is probably the most famous model
of oligopoly. And we're going to go
through mathematically and graphically how
to solve that. then we're going to look at
Stackelberg which is very similar to
Cournot it just makes a difference about who
moves first and finally we're going to look at
Bertrand so these are the four models so the
idea here is a firm's demand curve the
demand curve that they face depends on the
actions of both themselves and their rivals so
here we have two demand curves d1 and d2 let's
look at D2 first. So at D2, if you
change your price, the assumption on D2 is
no other firms change their prices. They
keep their prices as is. So a change in
price is going to lead to little changes in
either direction in terms of quantity
to demand. So if you go from B to let's say
this price here, you can see the quantity,
sorry, from B to price to this price
here, you can see that there's going to be
a difference in the quantity demanded
based on this however if every firm changes
their price it's going to be different
because if you lower your price here then
everyone's gonna flock to you instead of
the other firm but if every firm copies
your price as well then we're going to
end up with demand here so what this is telling
us is the demand that you face based
on your prices depends if the firms match
or don't match and this is what the demand
curves look like. So let's talk
about the Sweezy oligopoly model briefly. So this model is based
on a very specific assumption regarding how
other firms will respond to your price increases
and your price cuts. So here are the
characteristics of this market. There are only
a few firms serving many consumers so we
have our oligopoly they produce differentiated
products so the same type of product but
with some differences and this is the really
important bullet point here each firm believes
its rivals will cut their prices in response
to a price reduction but will not raise
their prices in response to you raising them
so going back to here is if you lower your
prices so from point B down you're going to
be facing demand curve one because your rivals
will also change but if you raise your prices
you're going to be on demand curve two
because your rivals will not match so that's the
key assumption there and there's barriers
to entry here so other firms can't enter it's
only the ones currently in the market so I
know this is messy but this is what the
Sweezy oligopoly model looks like so we have
our demand curve one and our demand curve two
they're the exact same as they were on the
previous page. And each demand curve is
associated with its own marginal revenue curve.
So this line here is marginal revenue 1 for
demand curve 1, and this is marginal revenue
2 for demand curve 2. Finally, ignore
marginal cost 1. For now, we have
marginal cost 0, which is the current
marginal cost. So what's going on
here? We can figure out the total demand curve
that a firm faces in the SWEASY model
as follows if the price is above b this
is when the two demand curves intersect
you're going to be on the demand curve where
other firms don't match your prices so
if you increase the price so we're going
to be on demand curve two so between a
and b then when you decrease your price
other firms are going to match it so we're
going to be on demand curve one instead of
demand curve to so the demand curve is
going to look like this a to b and then
b down here like that and what that's going
to mean is we're going to have the same kind
of kink in our marginal revenue curve so
the marginal revenue that the firm faces
when they price above b is going to be marginal
revenue too so a to c but after q0 onwards
other firms are going to um also lower their
prices so you move the marginal revenue
curve one which is the marginal revenue for
demand curve one so you go from C to E then E
down so your marginal revenue curve is AC
CE EMR so when you're facing this current
marginal cost what is the profit maximization
for this firm what does it mean in terms
of how much profit they produce so as you can
see the marginal cost intersects with the
marginal revenue which is the second marginal
revenue curve here as a result they produce
a point C the price will be where it hits
the demand curve here which is D2 so here
and as a result they produce Q0 so the big
implication of the Sweezy model is in any
other market if your marginal cost decrease
what does the firm do? Well yeah they can
they can produce more make more revenue
because even if their revenue is you know
diminishing now that their marginal cost is
smaller they can produce more to maximize their
profit. However as you can see here in
the Sweezy model let's say your marginal cost
decreases from zero to one as you can
see marginal cost one intersects with the
marginal revenue curve here on marginal revenue
one so they still charge a price of p0b
but they're not producing anymore they're not
producing anymore so we have this weird
implication in the sweezy model and that's
because they have no incentive to lower
their prices if they lower their prices then
other firms are also going to lower their
prices and then they're going to be facing
this demand curve here and the price is
going to decrease a lot so they're actually
going to make less money. So we have this
situation in between marginal cost zero
and marginal cost one any decrease in cost
between here and here will actually result
in a firm not producing any more units in
profit maximisation. So that's the main
implication of the Sweezy model all other
models suggest that if the marginal cost
decreases the firm will change their amount of
output but not in the Sweezy model under
those conditions and the limitation of this
model is it doesn't really explain how
this kink in the demand curve comes about it
just assumes it there so the other models
that we'll talk about we have less of these
overarching assumptions that we show how
people will behave if they just want to pay
off maximize in general. So Kono is going to
take a little bit of work for us to go
through, but it's a really interesting
application of the game theory we spoke about
over a week and a half. I don't want to
go any further than that, so let's
finish up here. Once again, no
class on Friday. Daniel and Zach,
come up to me, and you can get
your prizes, and I will see you all on Monday. Perry? So I'm not
going to be here on Monday because I have a
field trip for the club do you need a
paper or I can show you I got a document
you don't need to show me anything
so are we doing kaho on Monday or not?
no, probably not sounds good no worries have a good
trip thank you hey, Zach, what
do you want? what do I got? what
do I got? you can have a school? you
can have one of the candy gauze or we
can have Kuala and kangaroos. So what
color do you want? Yeah, I have this
exam and I have... Grain? Double grain? I can see one of
whatever comes in gold. Grain gold? Those are
the colors of strategy. What's that for? I had a question about
the other goblin. About what? About
the other goblin. So I was thinking,
so when you said that the marginal cost
reduces for the quantity is the same, I was
thinking of like the CPU industry, for the
longest time it was like Intel and AP,
they were pretty much controlling the market
before after SARS. But then, if you're aware,
the cost of making the chips
reduced over time, and they did
reduce, like the laptops kind of
got cheaper, right? but then wouldn't they
have the incentive to kind of keep up
with inflation because like a $500 phone
still costs $500 even though it costs them
so so inflation will be baked into probably
into their costs overall so as you'll see
when we look at the corno model the changing
marginal cost actually decreases the amount
supplied by both and it changes the
sorry it increases the supply one decreases
the The other one, it changes the pricing
in the market as well. So this is just the
weird implications of this Sweezy
model in particular, that in between
those two areas, firms don't change
their pricing. But all the
other models, and especially Bertrand,
as you'll see, that there's kind
of this competition between price
and the two firms that brings it
all the way down to the marginal
cost regardless. So in those cases,
when the marginal cost reduces, they do
increase the quantity. Yeah, exactly. They
do make changes. And this is just a
weird implication, it's so easy, and in
that one situation when it's in between
those two. Yeah, yeah, yeah,
exactly. Okay, yeah. Hey, Daniel,
what do you want? I'll get a kangaroo. Oh, you can have a stretch ball if you want. No, I just want to
get a koala as well. Oh, thank you. No worries. I love getting
a great sport. No, I'm glad, I'm glad. While you're in
Chicago, if you don't have a dinner place
checked out or decided yet, check out
Oven Grinders. Oven Grinders. Oh, I'll
check that out. They make a really interesting
kind of pizza. It's called the Oven
Grinder. You can find photos of mine,
and it's fantastic. That's really
good. You just have to get there
a little early because it's
popular. Okay. Nice. Thanks, Zach. Have a good one. Have fun. What's up, Jameson? Not much, are you?
I'm good, I'm good. I'm pretty tired,
but managing? Yeah. How's your
semester going? Not bad. Yeah? Pretty relaxed,
yeah. Yeah, how many courses
are you taking? Five, but one's
online, so. Is it a lot more chilly online?
What course is it? It's EAPS 327. It's like climate change,
environmental stuff. Okay, not too bad. Nice. And are you a junior? Yup, junior. Nice.
So what's your major? Environmental science. Nice. What got you into that? So I went to a really
small high school. When you say small,
how small are we total? Like 400 kids total,
about 90 per class. Or 100 per class, I
guess. Mine was 90. But yeah, I'd say
my junior year, I didn't really know
what I wanted to get into, but I took AP
Environmental Science, because we only
had two AP classes. I was like I could
get into this because I like being
outside because it's a pretty rural area
where I grew up so I was outside. Where
did you grow up? Winchester, do you
know Wall State? Yeah. So I'm
like 30 minutes east of like
Muncie. Oh nice. So you're an Indiana
boy? Yeah. Yeah. So yeah that's what got
me into environmental science because
I was always like Yeah, it's still
really important, some of the stuff we looked
at in here is like directly relating to
that, so especially the market failure
stuff probably interested you a fair
bit I'm guessing. Yeah. There's a whole entire
literature on the economics of climate
change, so yeah, a ton of stuff to dig
your teeth into if you're interested in
that, but yeah, nice. I'll be back in the JV