Competitive Strategy July 21 - 27

July 26
SEQUENTIAL GAMES aka dynamic games games with a time aspect on them one firm acts before the other second firm will be able to play the game knowing what the first firm has done and it's going to be able to adjust its actions accordingly first firm on the other hand has to make a decision without the requisite knowledge of the follower but, first firm will keep in mind that there will be a follower and that this follower is going to react in some sort (building up expectations) CHOCOLATE WARS universal studios charges 1.0mn for a product placement product placement by mars mars' gross profits increase by 0.8mn hershey's decrease by 0.1mn product placement by hershey hershey's gross profits increase by 1.2mn mars' decrease by 0.5mn no product placement: "business as usual" HOW DO WE DRAW THIS? we can't really draw a matrix instead, game tree GAME TREE first decision starts the game every decision point represents a node from there, the decisions of subsequent players branch out accordingly STRATEGY player's plan of actions in a game, given any possible circumstance

July 22
PRISONERS' DILEMMA Sensodyne's and Colgate's profits would be higehr if both did not advertise but both have an individual incentive to advertise anyway regardless of what the other player does →choosing dominant strategy does not imply that outcome will always be the best situation where there is a situation with a higher profit for both players but individually speaking both of them will want to not keep to that outcome NATURE OF THE PRISONERS' DILEMMA not a problem of information both players know the game inside out dilemma arises because both act selfishly result does not maximize joint payoffs Nash Equilibirum in the form of a Prisoners' Dilemma we have a better outcome, but both players individually will want to choose whatever maximizes their individual profits and we end up in a worse situation