Competitive Strategy 2

Pizza War - Piccola Osteria and Rosso Pizza sell pizza - They can charge High price: 12 Medium price: 10 Low price: 5 - Around school there are 1000 students 300 only buy at Piccola Osteria 300 only buy at Rosso Pizza 400 buy the cheaper pizza or choose randomly if same prices Game Setting - Players Piccola Osteria Rosso Pizza - Actions High prices Medium prices Low prices - Rules Both decide on prices simultaneously Example: Piccola Osteria: MP   Rosso Pizza: HP    Payoffs: Piccola Osteria: 300 loyal students + 400 price-senstive students (300 + 400) * 10   Rosso Pizza: 300 loyal students 300 * 12 - Matrix Form Piccola Osteria Pizza Rosso  H      M      L        H        M        L  DOMINANT STRATEGY strategy that always does bettern than any other strategy hence, should always be chosen by a rational player - you can rely on a rational rival always playing a dominant strategy DOMINATED STRATEGY strategy that never does better than another one hence, a rational player would never opt for this strategy - you can rely on a rational rival never playing a dominated strategy ELIMINATION PROCESS eliminate dominated strategies one by one continue until a solution to the game can be found/ you cannot eliminate more