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- We went through the 2×2 game format of the classic Prisoner’s Dilemma, in our case applied to price wars or “Bertrand Competition”
- Why aren’t price wars omnipresent? We focused on conditions in which they shouldn’t be observed, or should be limited in scope
- quantities not flexible: that’s our previous analysis, in which the equilibrium outcome is that both firms in our symmetric duopoly make positive profits, but less than if they were a cartel setting monopoly prices
- one firm has much lower costs, where there’s no need to cut prices much / the other firm has no incentive to cut prices
|
|
Miller |
|
|
Hold |
Cut |
| Bud |
Hold |
100, 100 |
180, 0 |
| Cut |
0, 180 |
80, 80 |