1 Flashcards
(18 cards)
4 assumptions about consumer preference
Completeness and rank ability
More is better than less
Transitory
More of a particular good, less willing to give up another good
Barriers to entry
Natural monopoly
Switching costs
Product differentiation
Absolute cost advantage or control of key inputs
Government regulation
Third degree price discrimination
Segementing
Second degree price discrimination
Versioning
1st degree price discrimination
Knowing everyone’s maximum willingness to pay
Rent seeking
Spending money in a socially unproductive efforts to acquire, maintain, or exercise monopoly
Grim reaper strategy
1 player deviates ones after cooperating and then the other punishes them forever
Tit for tat strategy
Copying what the player did to you in the last round
Adverse selection
A situation where there are stronger incentives for bad types of a product to be involved in a transaction than good types
Mitigating adverse selection in insurance
Screening (surveys)
Charging excess
Moral hazard
Arises when one party to a transaction cannot observe the other party’s behaviour
Principle agent relationships
Are a set of transactions that feature asymmetry between an principle and his hired agent
Signaling
Solution to asymmetric information, in which the knowledgeable party sorts the other party of univservable quality’s
Utility functions and risk aversion
Flatter, the less risk averse
More curved, more risk adverse
Pigouvian tax
Corrective tax
For negative externality
Pigovuviaj subsidy
A subsidy for a positive externality
Quota
A regulation mandating that the production or consumption of a certain good or externality be limited
Coarse theorem
Come to agreement at the lowest cost
