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There are 2 or more players, There is some choice of action where strategy matters, the game has outcomes; often, someone wins, someone loses, Outcomes depend on the strategies chosen by all players: there is strategic
interaction. |
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Non-cooperative.
No communication.
Simultaneous moves. |
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| What is a dominant strategy? |
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| A strategy is “dominant” if you get the highest payoff, regardless of what the other player does. |
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| What is a dominated strategy? |
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| A dominated strategy is uniformly worse than all other strategies. |
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| What is a secure strategy? |
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| Strategy which has the the best of the worst payoffs |
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| What is a dominant strategy equilibrium? |
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| players choose the strategy that yields strictly higher payoffs than any other strategy. |
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| What is "rule #1" with regard to dominant strategies? |
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| If you can identify a dominant strategy, play it! |
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| the optimal outcome of a game is one where no player has an incentive to deviate from his or her chosen strategy after considering an opponent's choice. Overall, an individual can receive no incremental benefit from changing actions, assuming other players remain constant in their strategies. A game may have multiple Nash equilibria or none at all. |
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| Solving for Nash equilibria in strategic form games |
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| Many interactions in life are repeated. |
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| “Rollback” solution to finitely repeated games |
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| start with the last period and work backwards. |
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| A strategy that is contingent on the past play of a repeated game, A strategy selected by a player will “trigger” an action by the other player. |
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Uncertainty regarding final period of a game. How is this similar to infinitely repeated
games? See Baye, pages 370-372. |
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| decision rule minimizing the possible loss for a worst case (maximum loss) scenario |
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| Axelrod’s Prisoner’s dilemma tournament. |
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| A signal that cooperation is desirable, A means of retaliation if undesirable behavior occurs, A means of preventing mutually destructive behavior |
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| Steps that can encourage cooperation |
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1) Enlarge the shadow of the future. 2) Change the payoffs.
3) Promote a community of interests. 4) Teach reciprocity.
5) Improve recognition capabilities. |
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| Mixed strategies–what are they and how are they described? |
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| Pure strategies represent “either/or” choices, A mixed strategy is a random mixture of pure strategies, Mixed strategies are useful in repeated games, but may be played in one-shot games. |
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| Mixed strategy Nash equilibrium defined |
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| A mixed strategy Nash equilibrium is the complete list of mixed strategies, with one for each player, so that the mixed strategy choice provides the highest payoff, given the mixed strategy choices of the other player. |
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| Solving form mixed strategy equilibrium: |
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Make the other player indifferent to the choice
of their strategies. |
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| You mininmize your oppontents maximum score |
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| the strategy that maximizes the minimum gain that can be achieved |
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| Trying to look at win-win situations as well as win-lose situations. |
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| Within the context of the “Value Net,” what are players? |
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| Customers, Suppliers, Substititors, and Complementors. |
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| What is a successful business strategy? |
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| Actively shaping the game you play, not just playing the game you find. |
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| Players from whom customers buy complementary products or to whom suppliers sell complementary resources. Ex.: hardware and software companies |
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| Substitutors are alternative providers or buyers of the same or similar product; they can be multiple companies that make very similar products, or they can be multiple customers who buy the same product, often for very different reasons. |
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| It is a diagram that shows all of the players in relation to each other. The company being examined is at the center, with the substitutors and complementors to the left and right, and the customers and suppliers above and below. |
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| What is a meet-the-competition clause? |
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| A Meet the Competition Clause gives the incumbent seller the right to make the last bid. This deters a challenger from coming in and taking away business simply by undercutting the existing price. If the challenger tried to undercut price, the incumbent could then come back with a lower price and keep the business. |
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| What are the 4 advantages to a win-win strategy? |
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1. There is greater potential for finding new opportunities.
2. Competitors may offer less resistance because they are not losing ground.
3. The new game is more sustainable because other players aren't forced to retaliate. 4. Imitation of this strategy is beneficial (GM example). |
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| What does a "one price for all" strategy entail? |
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| The price for a good or service is set beforehand, and is not negotiated with each individual customer. |
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| What are the traps of strategy? |
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| (1) Thinking you have to accept the game you find yourself in; (2) thinking that changing the game must come at the expense of others; (3) believing you have to find something to do that others cannot; (4) failing to see the whole game, and (5) failing to think methodically about changing the game. |
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Definition
When a smaller company enters a market and sells it products for lower prices. The
smaller company must choose to remain smaller instead of expanding. This only works when the larger incumbent company chooses to not match the lower prices and eventually drive the smaller company of out business, which is more likely if the smaller company stays small. |
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| What is the difference between simultaneous-move game and sequential-move game? |
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| Simultaneous moves are done without the knowledge of the other player, while sequential moves are done after the other player has made their move. |
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| What is one-shot game and how does it relate to simultaneous-move? |
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| One-shot means that players will only play the game once. The two concepts are used make decisions in firms to analyze situations where one would could profit off the action of another firm |
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| How did Nintendo manipulate demand for its cartridges and game counsels? |
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| It created a shortage at every retailer. This led consumers to line-up for the product, thus creating publicity and keeping prices high because of the shortage. |
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| How did Nintendo extend the life of the 8-bit market? |
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| By holding off on producing 16-bit games. Since 16-bit games were more pricy, 8-bit games remained a viable substitute. |
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