APPLIED ECONOMICS AND MANAGEMENT
AEM 4240, Management Strategy
Instructions for the Competitive Strategy Game -- Version 3.20
WHAT IS IT?
The competitive strategy game is a simulation of the strategic interaction between eight firms that
compete with one another in one or more of four different markets (A, B, C, and D). Firms must pay to
enter a market and pay to produce products in the markets they enter. Each firm has different strengths
in each market; for instance, one firm may be the most cost-efficient producer in Market A, but may face
the highest entry cost in Market B. The demand function, capital intensity of production, and brand
substitutability are different for each market. One market may be hospitable to many of the companies at
once while another may offer a profitable opportunity to just one company in the game.
Each team of students controls one firm in the game. In doing so, they decide 5 things:
which market (or markets) to enter
when to enter
how much investment to make in production facilities for each market entered
when to exit a market
what prices to charge for products produced
The game is complex, so it is very important to study it thoroughly before it begins.
Failure to follow
instructions will lower your grade for the game.
The game is divided into 8 periods.
The syllabus indicates the class each period begins, always a
Thursday, and firm strategies must be submitted
before 4 pm
the next day. For example, the entry for
the first input, noted for the Thursday the 2nd of October class, is due at 4 pm, Friday the 3rd. The
outcome of each period will be available on the CSG website.
The Role of Information
An important aspect of the strategy game is the role of information. Information may be public, private
or public with some ‘noise’ (unknown accuracy).
Market Information (Public)
Which markets each firm has entered, production capacity produced and prices charged
of possible entry and production costs of the competition for each market (the market
profile, see Attachment A for an example).
Noisy information: total sales for a period contains some error and public statements from other
firms may be misleading
Example: Market A entry cost: mean = $8,000, standard deviation = $2,000. (All distributions are
normal.) Your firm entry cost in Market A = $10,000
than most of your competitors',
but not 100% certain.
Firm Information (Private)