Equilibrium (in a Model)
In the context of a model, an equilibrium describes a self-perpetuating outcome. Once this state is reached, it will persist and not change unless it is disrupted by an external force. An external force refers to a factor that is determined outside the boundaries of the model itself.
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Introduction to Microeconomics Course
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CORE Econ
Ch.4 Strategic interactions and social dilemmas - The Economy 2.0 Microeconomics @ CORE Econ
The Economy 2.0 Microeconomics @ CORE Econ
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Interdisciplinary Applications of Game Theory
Best Response (in Game Theory)
Equilibrium (in a Model)
Setup for the Adam and Bella Entertainment Choice Game
Advancement of Game Theory through Nash's Work
Strategic Interaction
Enhancing Game-Theoretic Models to Account for Cooperative Behavior
Self-Interest in Economic Models
Homo Economicus
Foundational Importance of Game Theory and Nash Equilibrium for Economic Modeling
Definition of Social Dilemma
Definition of Social Interaction
John Nash
Analyze each of the following scenarios. Match each scenario with the type of social outcome that is most likely to result from the self-interested actions of the individuals involved.
Strategic Business Decisions
The Coffee Shop Dilemma
Analyzing US Financial Fragility
Two competing coffee shops, 'The Daily Grind' and 'Espresso Yourself', are located across the street from each other. Each must independently decide whether to lower their prices. The table below shows the daily profit each shop can expect based on their combined decisions. The first number in each cell is the profit for The Daily Grind, and the second is for Espresso Yourself.
Espresso Yourself: Keep Price High Espresso Yourself: Lower Price The Daily Grind: Keep Price High $500, $500 $200, $600 The Daily Grind: Lower Price $600, $200 $300, $300 Assuming both shops act in their own immediate self-interest to maximize their own profit, what is the most likely outcome of this situation?
The Farmers' Irrigation Dilemma
A social interaction, where each individual's decisions affect the outcomes of others, will always result in a worse outcome for everyone involved when each person acts solely in their own self-interest.
A small city's transportation market for on-demand rides is dominated by a single taxi company that owns all the operating licenses, resulting in high prices and long wait times for consumers. A new city council wants to introduce policies to make this market more competitive. Arrange the following potential policy changes in order from the one that would MOST increase competition to the one that would LEAST increase competition.
Resolving a Shared Resource Dilemma
Non-Social Interactions in Economic Models
The Anil and Bala Crop Choice Scenario as a Game
An economist is building a formal model to predict the outcome of a wage negotiation between a labor union and a company's management. To effectively model this as a strategic interaction, which of the following elements is LEAST critical to define as a core component of the model's basic structure?
Learn After
Nash Equilibrium
Coffee Shop Price Competition
Consider a model of the market for rental apartments in a city. The model is in a stable, self-perpetuating state where the number of apartments landlords are willing to rent out at the current monthly price is exactly equal to the number of apartments tenants are willing to rent. According to the definition of an equilibrium, which of the following events represents an external force that would disrupt this state?
Identifying an Equilibrium State
Analyzing a Social Convention as an Equilibrium
Consider a model of a local farmers' market where all vendors are currently selling their apples for $5 per bag. One vendor realizes they could attract significantly more customers and increase their profits by lowering their price to $4.50 per bag. The current state, where all vendors sell at $5, is an equilibrium because it is the current outcome.
An equilibrium is defined as a self-perpetuating outcome within a model, meaning it will persist unless acted upon by an external force. Which of the following scenarios describes a situation that is not in equilibrium because the outcome is not self-perpetuating?
Analyzing the Link Between CO2 Emissions and Coral Reef Decline
Match each scenario with the description that correctly applies the concept of equilibrium, defined as a self-perpetuating outcome that persists unless disturbed by an external force.
A new smartphone model is released with limited initial stock, creating a secondary resale market. The following events describe how this market might reach a stable, self-perpetuating price. Arrange these events in the logical order that leads to this stable outcome.
Consider a model of commuter traffic between a residential area and a downtown district. There are two possible routes: a direct highway and a longer scenic route. The travel time on the scenic route is always 40 minutes. The travel time on the highway depends on the number of cars; it is 20 minutes with no traffic but increases as more cars use it. The current situation is that traffic is split between the two routes such that the travel time for both is exactly 40 minutes. Why is this specific distribution of cars considered a self-perpetuating outcome?