Application of game theory in a duopoly : an analysis of the telecommunications industry in the Maldives / Mariyam Jailam Mujuthaba

In a duopoly market where there are only two competing firms, the interaction between the two firms is vital in determining the final market outcomes. Even though the firms operate independently, their strategic decisions rely on the decisions and the forecasted strategies of the other firm.
This research work evaluates the popular theoretical models of game theory used to analyse duopoly markets to establish the market equilibriums for prices and quantities for the telecommunications industry in Maldives which operates as a duopoly market. Furthermore, the relevance of such theoretical models to evaluate real market situations to understand the behaviour of firms in a duopoly market and identify the potential for collusive agreements is analysed through the review of systematic scientific literature.
The market situation in the telecommunications industry prior to 2005 when it operated as a monopoly market is analysed using the "Prisoners Dilemma" model and evaluating the discrete strategies equilibrium. A mixed strategies game is analysed to provide a solution for a case where an equilibrium did not exist under discrete strategies. Furthermore, the three duopoly models Cournot, Bertrand and Stackelberg, are analysed in hypothetical market situations in the telecommunications industry. Moreover, the advantages for a market leader and the follower are analysed through a dynamic Stackelberg game and a differentiated Bertrand game.