Check Your Progress:

1. Who advocated the Theory of Games?

2. Explain the assumptions of Two person zero sum game.

2.6 SUMMARY

1. Avoiding the uncertainty arising from interdependence under

oligopoly is to enter into mutual or collusive agreements.
2. Collusion is mainly of two types, Cartels and price leadership.
3. A cartel may be defined as a formal organisation of the firms in
a given industry or group.
4. Cartels basically mean the formal agreement between firms in
an oligopolistic market to co-operate with regard to agreed
procedures on variables such as price and output.
5. There are various forms of price leadership. The most common
types are :
i.Price-leadership by a low cost firm
ii.Price-leadership by a dominant firm
iii.Barometric price leadership
6. The Theory of Games offers a different approach to the study
of oligopoly. Game theory was advanced by work of a number
of scholars; the most significant achievement was the
publication in 1944 of John von Neumann and Oskar
Morgenstern's monumental "The theory of Games and
Economics Behaviour."
7. The simplest model is a duopoly market in which each firm
tries to maximise its market share. Given this aim, it is clear
that whatever one firm gains, the other looses. In other words,
any gains of one firm is cancelled by the loss of the other firm
so that the net gain is zero. Hence the name Zero-sum game.
Since only two persons or firms are involved, it is called a two
person game.