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CSG_instructions_2008_ProblemSet - CORNELL UNIVERSITY...

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CORNELL UNIVERSITY 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 The range 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 probably higher than most of your competitors', but not 100% certain. Firm Information (Private)
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Each firm's company profile, which contains private information, (See Table 1 below for an example) that indicates each cost the company would have in each market. These costs do not change over the course of the game. Other firms will not know your firm specific costs. MARKET DEMAND (TUTORIAL):
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CSG_instructions_2008_ProblemSet - CORNELL UNIVERSITY...

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