Rules of Engagement

Repeated Duopoly

Students set their firm’s prices with the goal of maximizing profits in this competitive game

In the Repeated Duopoly Price Game, students learn about the principles of best response function, Nash equilibrium and game theory.

Students play the role of manager of a firm in a market comprised of two firms. Their task is to choose a price from {1,2,3,4,5,6,7} and the profit they will earn each round depends on their price and the price of the other firm in their market. The competing firm is managed by another student in the class who has been randomly matched and neither player knows the identity of the other. The other student has the same profit table and has received the same set of instructions.

After each student submits their prices, they will both learn the prices that were selected and the profits earned. A random device will then determine whether or not the game is terminated. The student’s payoff is the average profit earned over all rounds played.

OPEQ

Wharton’s oil pricing simulation OPEQ is used in negotiations courses to teach issues involving shared resources and incomplete information. It provides an experience-based learning tool that demonstrates principles of individual versus overall profit levels and the behavior of competitors in a closed market.