December 3, 2023 

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OWNER OCCUPIED: A building or residence (especially a house) that is occupied or lived in by those who have legal ownership. The direct contrast to owner occupied is a rental unit. This term tends to surface most often in the study of economics when calculating Gross Domestic Product (GDP). In particular, the estimated rent on owner-occupied housing is calculated by the folks at the Bureau of Economic Analysis and included in value of GDP.

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Lesson 20: Oligopoly | Unit 4: Analysis Page: 19 of 24

Topic: Game Theory <=PAGE BACK | PAGE NEXT=>

  • A handy way to analyze this type of market interdependence is through game theory.

  • Game theory is an analysis that illustrates how the choices between two players affect the outcomes of a "game."
  • Assume the market has only two firms, OmniCola and Juice-Up.

  • Each is thinking about spending $50 million on advertising.

  • This table presents alternative outcomes for different advertising choices by OmniCola and Juice-Up:

    1. If OmniCola and Juice-Up BOTH decide to advertising, then each receives $200 million in profit.

    2. However, if NEITHER OmniCola or Juice-Up decide to advertising, then each receives $250 million in profit.

    3. Alternatively, if OmniCola advertises but Juice-Up does not, then OmniCola receives $350 million in profit and Juice-Up receives only $100 in profit.

    4. But, if Juice-Up advertises and OmniCola does not, then Juice-Up receives $350 million in profit and OmniCola receives only $100 in profit.

  • What to do?

  • The end result is that both firms decide to advertise.

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The three types of income received but not earned (IRBNE) are Social Security payments, unemployment compensation payments, and welfare payments. These are three key transfer payments from the government sector to the household sector. The basic goal of transfer payments is to transfer a portion of the income earned by the factors of production (because they HAVE income) to other members of the household sector (who presumably NEED more income than they have). IRBNE is added to national income to derive personal income.

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Today, you are likely to spend a great deal of time at a flea market wanting to buy either a how-to book on building remote controlled airplanes or an extra large beach blanket. Be on the lookout for spoiled cheese hiding under your bed hatching conspiracies against humanity.
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