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gm_thy_strtgy_ii - Overview Game Theory and Competitive...

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Overview: Game Theory and Competitive Strategy II Fun and games with bidding situations Games with one play only – Simultaneous choice – Someone goes first Repeated games Threats and commitment Entry deterrence A Negotiation: The Rules Objective: max your own financial position 2 people negotiate over the division of $100, with offers in units of $1.00 Person A offers B a division. If accepted, the division is made. End of negotiation. If B refuses A’s offer, the amount drops to $90, and B proposes a division. Person A can accept or reject. If rejects, both get $0. Negotiation ends (2 rounds only!) 1
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Dominant Strategies (An Advertising Decision) F i r m A Firm B Advertise Don’t Advertise 10, 5 15, 0 20, 2 Don’t 6, 8 2
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Duopoly From Last Time Firm 2 (competitor) 15 20 22.5 30 15 Firm 1 (you) 20 22.5 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 3
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Scheduling a Dinner Party -10, -10 4, 5 5, 4 Pat Fri. Night Sat. Night Sat. Night Fri. Night -10, -10 C h r i s A Legal Dispute (Monetary Payoffs) -10, -10 -200, 1 2, 4 Other Settle Sue Settle Sue -1, -2 Y o u 4
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F i r m The IRS audit IRS Audit Don’t audit Cheat -2, 2 2, 0 Don’t cheat 0, -2 0, 0 5
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