s in the industry and each of them wants to maximise its pay-off. The pay-off that a player receives measures how well he achieves his objective. Let's assume in our model the pay-off to be a profit. Their profits depend upon the decisions they make (the strategies chosen by the various players including themselves). A strategy in this model is a plan of action, or a complete contingency plan, which specifies what the player will do in any of the circumstances in which he might find himself. The game also depends on the move order and the information conditions. Games can be categorised according to the degree of harmony or disharmony between the players' interests. The pure coordination game is the one extreme, in which players have the same objectives. The other extreme is the pure conflict of the opposite interests of players. And usually there is a mixture of coordination and conflict of interests- mixed motive games. Although the importance of the other players' choices takes place, sometimes a player has a strategy that is the best irrespective of what others do. This strategy is called dominant, and the other inferior ones are called dominated. A situation in which each player is choosing the best strategy available to him, given the strategies chosen by others, is called a Nash equilibrium. This equilibrium corresponds to the idea of self-fulfilled expectations, tacit, self-supporting agreement. If the players have somehow reached Nash equilibrium, then none would have an incentive to depart from this agreement. Any agreement that is not a Nash equilibrium would require some enforcement. b.) The problem of collusion. Now I would like to use an example of a game in which the Cournot output deciding duopoly is involved. This game is illustrated by the table below: Firm B's output levelHIGHLOWFirm A's output levelHIGH(1;1)(3;0)LOW(0;3)(2;2) Here a firm chooses between two alternatives: high and low output strategies....
