{[ promptMessage ]}

Bookmark it

{[ promptMessage ]}

Week6 Slides - 2 1 Relationship between internal and...

Info icon This preview shows pages 1–5. Sign up to view the full content.

View Full Document Right Arrow Icon
M&S 452 — Strat and Org c 2008 Scott Schaefer 1 Lecture 6: Organization and Strategic Commitment Where we’ve been... Analyzing things that go on inside organizations * Incentives * Performance measurement * Divisionalization and decentralization Strategy applications * Complementarities * Positioning using performance measurement tradeoffs M&S 452 — Strat and Org c 2008 Scott Schaefer 2 Where we’re headed... Relationship between internal and external considerations Two main questions * How do internal organizational decisions affect product market competition? * What factors affect the optimal scope of the organization?
Image of page 1

Info icon This preview has intentionally blurred sections. Sign up to view the full version.

View Full Document Right Arrow Icon
M&S 452 — Strat and Org c 2008 Scott Schaefer 3 Cournot Competition A model of oligopoly behavior Imagine firms first choose capacities and then price adjusts to equate supply and demand. Applies most naturally to markets in which firms make production decisions in advance and face high costs of holding inventories — price should adjust more quickly than quantity. M&S 452 — Strat and Org c 2008 Scott Schaefer 4 Rivals react to aggression by being less aggressive. Reaction functions are downward sloping. The Cournot game features Strategic Substitutes : This means if firm 1 chooses a higher quantity (that is, a higher level of its strategic variable), firm 2’s best response is to choose a lower quantity. Strategic variables are inversely related.
Image of page 2
M&S 452 — Strat and Org c 2008 Scott Schaefer 5 R 1 R 2 Q 2 Q 1 45 45 Q * 2 = 30 Q * 1 = 30 M&S 452 — Strat and Org c 2008 Scott Schaefer 6 Bertrand with Differentiated Products Another model of oligopoly behavior Think of competitors producing imperfect substitutes. Applies most naturally to markets in which firms can steal some business from competitors by cutting prices. Rivals react aggressively to aggressive moves.
Image of page 3

Info icon This preview has intentionally blurred sections. Sign up to view the full version.

View Full Document Right Arrow Icon
M&S 452 — Strat and Org c 2008 Scott Schaefer 7 Reaction functions are upward sloping. The Differentiated Goods Bertrand game features Strategic Complements : This means if firm 2 chooses a higher price (that is, a higher level of its strategic variable), firm 2’s best response is to choose a higher price. Strategic variables are directly related.
Image of page 4
Image of page 5
This is the end of the preview. Sign up to access the rest of the document.

{[ 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