Review 6.pptx - REVIEW 6 Q&A • Summary of Week 6 •...

This preview shows page 1 - 6 out of 17 pages.

1 Summary of Week 6 Critical thinking question Problem-solving REVIEW 6 Q&A
Image of page 1

Subscribe to view the full document.

2 Q1 What is meant by “first-mover advantage”? Give an example of a gaming situation with a first-mover advantage. A “first-mover” advantage can occur in a game where the first player to act receives the highest payoff. The first-mover signals his/her choice to the opponent, and the opponent must choose a response, given this signal . The first-mover goes on the offensive & the second-mover responds defensively. In many recreational games, from chess to football, the first-mover has an advantage. In many markets, the first firm to introduce a product can set the standard for competitors to follow. In some cases, the standard-setting power of the first mover becomes so pervasive in the market that the brand name of the product becomes synonymous with the product, e.g., “Kleenex,” the name of Kleenex-brand facial tissue, is used by many consumers to refer to facial tissue of any brand.
Image of page 2
3 Q2 A strategic move limits one’s flexibility and yet gives one an advantage. Why? How might a strategic move give one an advantage in bargaining? A strategic move influences conditional behavior by the opponent. If the game is well understood, and the opponent’s reaction can be predicted, a strategic move can give the player an advantage in bargaining. If a bargaining game is played only once (so no reputations are involved), one player might act strategically by committing to something unpleasant if he does not adhere to a bargaining position he has taken. For example, a potential car buyer might announce to the car dealer that he will pay no more than $20,000 for a particular car. To make this statement credible, the buyer might sign a contract promising to pay a friend $10,000 if he pays more than $20,000 for the car. If bargaining is repeated, players might act strategically to establish reputations for future negotiations.
Image of page 3

Subscribe to view the full document.

4 Q3. Why might a seller find it advantageous to signal the quality of a product? How are guarantees and warranties a form of market signaling? Firms producing high-quality products would like to charge higher prices, but to do this successfully, potential consumers must be made aware of the quality differences among brands. One method of providing product quality information is through guarantees (i.e., the promise to return what has been given in exchange if the product is defective) and warranties (i.e., the promise to repair or replace if defective). Since low-quality producers are unlikely to offer costly signaling devices, consumers can correctly view a guarantee or an extensive warranty as a signal of high quality. These measures are effective as signaling devices.
Image of page 4
5 In the past, American companies enjoyed a reputation for producing high-quality cars.
Image of page 5

Subscribe to view the full document.

Image of page 6

{[ snackBarMessage ]}

What students are saying

  • Left Quote Icon

    As a current student on this bumpy collegiate pathway, I stumbled upon Course Hero, where I can find study resources for nearly all my courses, get online help from tutors 24/7, and even share my old projects, papers, and lecture notes with other students.

    Student Picture

    Kiran Temple University Fox School of Business ‘17, Course Hero Intern

  • Left Quote Icon

    I cannot even describe how much Course Hero helped me this summer. It’s truly become something I can always rely on and help me. In the end, I was not only able to survive summer classes, but I was able to thrive thanks to Course Hero.

    Student Picture

    Dana University of Pennsylvania ‘17, Course Hero Intern

  • Left Quote Icon

    The ability to access any university’s resources through Course Hero proved invaluable in my case. I was behind on Tulane coursework and actually used UCLA’s materials to help me move forward and get everything together on time.

    Student Picture

    Jill Tulane University ‘16, Course Hero Intern