An introduction to the theory of games by E. S. Venttsel'

By E. S. Venttsel'

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P. e. (p .. ) ·I I I ap, . ( ) e (! 2 \i i e /. ) is strictly decreasing on p,, \i i e I. ) b) C) I I I ·I a 2 pi I aU~(p .. J I ·I I > 0, \:fj I ap j pj ·:;e· J aU 2. ( p,,p, ) I I >LI :;C ·I I . , 'v'z e I. i, \:fi E /. apipi We have found it convenient to break Assumption 2' in three different parts. 2' a) simply states that U. ( ) is strictly concave on p.. 2 part b). This case has been considered under no differentiability by Topkis (1979), Bulow, Geanakoplos and Klemperer ( 1985), Vives ( 1990) and Milgrom and Roberts ( 1990).

9). 4 INFLATION TRANSMISSION IN THE COURNOT MODEL Sometimes it is argued that inflation results from the combination of cost pushes and the oligopolistic structure of the markets and that if the market could be forced to be more competitive, inflation would be reduced. This argument looks suspicious because of the difference between high prices (in an oligopolistic market, ceteris paribus, prices are always higher than in a competitive market) and the sensitivity of prices to an exogenous cost push.

Summing up, in this Lecture we have studied how the entry of a new player and a shift in payoff functions affect the strategies played and the payoff obtained in a Nash Equilibrium. 2, the effect of entry or an idiosyncratic shock, conform with our intuition. 2 counterintuitive effects can occur. 2 is assumed, nothing can be said about payoffs and individual strategies. Also, we have studied conditions under which oligopolistic markets transmit more (or less) inflation than perfectly competitive ones.

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