gm_thry_strtgy_i

gm_thry_strtgy_i - Overview: Game Theory and Competitive...

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Overview: Game Theory and Competitive Strategy I Small Numbers and Strategic Behavior • Fun and games with a duopoly example – Simultaneous vs. sequential choice – One-time vs. repeated game – Quantity vs. price as the choice variable – Homogeneous vs. differentiated good Review of the analytics Key Ideas Know strategic situation (What is the game?). Your competitor is just as smart as you are! Think about the response of others Nash equilibrium: all participants do the best they can, given the behavior of competitors.
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The Game (a) • Objective: Max. your profit • # of plays: 1 only • Good: Homogeneous • Choice variable: Quantity • Timing of choice: Simultaneous Game Payoffs Firm 2 (competitor) 15 20 Firm 1 15 (you) 20
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Game Payoffs Firm 2 (competitor) 15 20 22.5 30 15 20 22.5 Firm 1 (you) 30 450, 450 375, 500 338, 506 225, 450 500, 375 400, 400 350, 394 200, 300 506, 338 394, 350 338, 338 125, 150 450, 225 300, 200 150, 125 0, 0
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The Game (a*) • Objective: Max. your profit • # of plays: 2 • Good: Homogeneous • Choice variable: Quantity • Timing of choice: Simultaneous
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The Game (a**) • Objective: Max. your profit • # of plays: 10 • Good: Homogeneous • Choice variable: Quantity • Timing of choice: Simultaneous
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gm_thry_strtgy_i - Overview: Game Theory and Competitive...

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