"In economics, industrial organization is a field that builds on the theory of the firm by examining the structure of (and, therefore, the boundaries between) firms and markets."
An introduction to the use of game theory in Industrial Organization to model and predict strategic behavior of firms in different market scenarios.
Nash equilibrium: A concept in game theory where no player has an incentive to change their strategy given their opponent's strategy, leading to a stable outcome.
Dominant strategy: A strategy that is the best option for a player, no matter what strategy the other player(s) choose.
Prisoner's dilemma: A game in which two individuals have to choose whether to cooperate or defect, leading to different outcomes depending on the choices made.
Iterated prisoner's dilemma: The repeated version of the prisoner's dilemma, where players choose their strategy repeatedly over time, leading to more complex outcomes.
Game trees: A graphical representation of the sequence of moves and strategies in a game, useful in determining the best strategy.
Bayesian games: A type of game where players have incomplete information regarding the actions and motives of other players.
Auctions: A mechanism for allocating goods or services to bidders with different values, using different types of auction formats.
Oligopoly: A market structure where a few large firms dominate the market, leading to strategic interactions between them.
Cournot model: A model of oligopoly where firms choose quantities to produce simultaneously, leading to a Nash equilibrium.
Bertrand model: A model of oligopoly where firms set prices simultaneously, leading to a different equilibrium outcome from the Cournot model.
Stackelberg model: A model of oligopoly where one firm sets its quantity/price first, followed by the other firms, leading to a different equilibrium outcome from the Cournot and Bertrand models.
Entry deterrence: A strategy used by incumbent firms to prevent new firms from entering the market.
Cartels: A collusive agreement between firms to restrict output and increase profits by acting as a monopoly.
Predatory pricing: A strategy used by a firm to drive its competitors out of the market by setting low prices temporarily.
Network effects: A phenomenon where the value of a product or service increases with the number of users, leading to strategic interactions between firms.
Non-cooperative game theory: This type of game theory involves individual decision-making, where each player aims to maximize their own payoff.
Cooperative game theory: Contrary to non-cooperative game theory, this type of game theory involves players who work together to achieve a common goal.
Sequential game theory: In this type of game theory, players make decisions in a sequential order, where the choices of one player affect the decisions of the following players.
Simultaneous game theory: In this type of game theory, players make their decisions simultaneously, and the choice of one player does not affect the decisions of the other players.
Repeated game theory: Repeated game theory involves players who interact with each other multiple times and make decisions based on their previous outcomes.
Bayesian game theory: In this type of game theory, players have incomplete information about the strategies, payoffs, or type of players they are interacting with.
Evolutionary game theory: This type of game theory is used for modeling the evolution of behavior in a population over time.
Mechanism design theory: This type of game theory deals with the design of systems, where players with conflicting interests make decisions based on a set of rules or incentives.
"Industrial organization adds real-world complications to the perfectly competitive model, complications such as transaction costs, limited information, and barriers to entry of new firms that may be associated with imperfect competition."
"It analyzes determinants of firm and market organization and behavior on a continuum between competition and monopoly, including from government actions."
"There are different approaches to the subject. One approach is descriptive in providing an overview of industrial organization, such as measures of competition and the size-concentration of firms in an industry."
"A second approach uses microeconomic models to explain internal firm organization and market strategy, which includes internal research and development along with issues of internal reorganization and renewal."
"A third aspect is oriented to public policy related to economic regulation, antitrust law, and, more generally, the economic governance of law in defining property rights, enforcing contracts, and providing organizational infrastructure."
"The extensive use of game theory in industrial economics has led to the export of this tool to other branches of microeconomics, such as behavioral economics and corporate finance."
"Industrial organization has also had significant practical impacts on antitrust law and competition policy."
"The development of industrial organization as a separate field owes much to Edward Chamberlin, Joan Robinson, Edward S. Mason, J. M. Clark, Joe S. Bain, and Paolo Sylos Labini, among others."
"Complications such as transaction costs, limited information, and barriers to entry of new firms that may be associated with imperfect competition."
"Analyzes determinants of firm and market organization and behavior on a continuum between competition and monopoly, including from government actions."
"One approach is descriptive in providing an overview of industrial organization, such as measures of competition and the size-concentration of firms in an industry."
"Microeconomic models explain internal firm organization and market strategy, which includes internal research and development along with issues of internal reorganization and renewal."
"A third aspect is oriented to public policy related to economic regulation, antitrust law, and, more generally, the economic governance of law in defining property rights, enforcing contracts, and providing organizational infrastructure."
"The extensive use of game theory in industrial economics has led to the export of this tool to other branches of microeconomics, such as behavioral economics and corporate finance."
"Industrial organization has also had significant practical impacts on antitrust law and competition policy."
"The development of industrial organization as a separate field owes much to Edward Chamberlin, Joan Robinson, Edward S. Mason, J. M. Clark, Joe S. Bain, and Paolo Sylos Labini, among others."
"[Industrial organization] builds on the theory of the firm by examining the structure of (and, therefore, the boundaries between) firms and markets."
"Complications such as transaction costs, limited information, and barriers to entry of new firms that may be associated with imperfect competition."
"[Industrial organization] analyzes determinants of firm and market organization and behavior on a continuum between competition and monopoly, including from government actions."