Lecture Managerial economics (8e): Chapter 10 - Samuelson, Marks

Chapter 10 - Game theory and competitive strategy. In this context, we could just as well call our approach strategic profit analysis. Nonetheless, the more general term, game theory, remains apt. This name emphasizes the kind of logical analysis evident in games of pure strategy - chess, poker, even war games.

Chapter

 Ten

Game Theory and 

Competitive Strategy

It is a remarkable fact that business 

strategies are played largely in the mind.  Only a small part of the play appears in  overt action. Its full scope and depth lie in  the payers’ looking backward and forward  and running through their minds their  alternative moves and countermoves.

~John McDonald,

The Game of Business

A Battle for Air Passengers

Three airlines (A, B, and C) are competing 

for passengers on a lucrative long­haul air route

Sizing up competitive situations

Elements common to all competitive situations:

1. Players and Their Actions

2. Outcomes and Payoffs

3. Underlying “Rules”

Elements that differ across

 competitive situations:

1. Number of Competitors

2. Degree of Mutual Interest

3. Communication and Agreement among Competitors

4. Repeated or One­Shot Competition

5. Amount of Information

Analyzing payoff Tables

Jockeying in the TV Ratings Game

Equilibrium Strategies

Market­Share Competition

The Prisoner’s Dilemma Once Again

Two Tiered Tender Offers

A Common Standard for High­Definition DVDs

The Platform Wars Continue

Market Entry

Bargaining

Bargaining Over the Terms of a Transaction

Competitive Strategy

Sequential Competition

An International Mineral Lease

Entry Deterrence

Moving Toward an International  Agreement

Figure 10.2

Deterring Entry

Repeated Competition

Repeated Price Competition

Other Aspects of Reputation

A Final Note on Finite Competition

A Battle for Air Passengers Revisited

Appendix to Chapter 10

MIXED STRATEGIES

Market Competition Revisited

A Game of Trust