chapter_13 Game Theory and Competitive Strategy.ppt

Chapter 13
Game Theory petitive Strategy
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Chapter 1
Topics to be Discussed
Gaming and Strategic Decisions
Dominant Strategies
The Nash Equilibrium Revisited
Repeated Games
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Chapter 1
Topics to be Discussed
Sequential Games
Threats, Commitments, and Credibility
Entry Deterrence
Bargaining Strategy
Auctions
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Chapter 1
Gaming and Strategic Decisions
“If I believe that petitors are rational and act to maximize their own profits, how should I take their behavior into account when making my own profit-maximizing decisions?”
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Chapter 1
Gaming and Strategic Decisions
Noncooperative versus Cooperative Games
Cooperative Game
Players negotiate binding contracts that allow them to plan joint strategies
Example: Buyer and seller negotiating the price of a good or service or a joint venture by two firms (. Microsoft and Apple)
Binding contracts are possible
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Chapter 1
Gaming and Strategic Decisions
Noncooperative versus Cooperative Games
Noncooperative Game
Negotiation and enforcement of a binding contract are not possible
Example: peting firms assuming the others behavior determine, independently, pricing and advertising strategy to gain market share
Binding contracts are not possible
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Chapter 1
Gaming and Strategic Decisions
Noncooperative versus Cooperative Games
“The strategy design is based on understanding your opponent’s point of view, and (assuming you opponent is rational) deducing how he or she is likely to respond to your actions”
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Chapter 1
Gaming and Strategic Decisions
An Example: How to buy a dollar bill
1) Auction a dollar bill
2) Highest bidder receives the dollar in return for the amount bid
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Chapter 1
Gaming and Strategic Decisions
An Example
3) Second highest bidder must pay the amount he or she bid
4) How much would you bid for a dollar?
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Chapter 1
Acquiring pany
pany A: The pany T: The Target
A will offer cash for all of T’s shares
What price to offer?
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Chapter 1