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Game Theory
| Question | Answer |
|---|---|
| What are sequential games? | - Players take turns making decisions - Players can see each others decisions |
| Rule(s) for Sequential Games? And any Conditions for the rule to apply? | - Look Ahead, Reason Back Try to see how your decisions will affect other people's decisions, see through to the end as far as possible Conditions: - Observable and non-reversible moves |
| Tool for Sequential Games? | Game Tree Its like decision tree but there are more than 1 player 1. Determine the end profits in each scenario for each player 2. Players can look forward and reason backward to predict what the other side will do |
| What are simultaneous games? | - players decide at the same time - players can't see each others moves |
| Rule 1 for Simultaneous Games? | Rule 1: Have a dominant strategy? Use it. Your opponent will. |
| Rule 2 for Simultaneous Games? | Rule 2: Eliminate any dominated strategy from consideration & go on doing so successively |
| Rule 3 for Simultaneous Games? | Rule 3: If no dominant strategies, look for an equilibrium strategy (best response to the others) - Unique Equilibrium? good argument all players should play it - Many Equilibrium? Needs a reason for picking one - No Equilibrium? Mix it up |
| What is the Market Entry Game? | - A new firm is trying to enter the market where there is a dominant player (300k) - If new firm enters, dominant has 2 options: accommodate or fight Accommodate: New makes 100k, Dominant only makes 100k Fight: New loses 200k, Dominant makes -100k |
| Solution to the Market Entry Game? | USE A GAME TREE - NEW should enter the market, fast cleaners should accommodate - This is the only way to ensure minimal loss and some profit on both sides |
| What type of game is Market Entry? | Sequential |
| What is Bargaining (Splitting Ice Cream) Game? | USE A GAME TREE - One Ice cream, two players take turns offering how to divide the ice cream - After each turn, the ice cream melts 50% |
| Solution to the Bargaining (Splitting Ice Cream) ? | First player to offer should offer 50/50 (when the ice cream is split-able 50/50) |
| What kind of game is Bargaining (Splitting Ice Cream)? | Sequential |
| What is the Prisoner's Dilemma? | Two criminals are caught and put in seperate interrogation rooms They cannot communicate and don’t know what the other prisoner will do Confess/Deny: 0/5 Confess/Confess: 4/4 Deny/Deny: 2/2 |
| Solution to the Prisoner's Dilemma? | USE A PAY OFF TABLE Equilibrium, both prisoners should deny |
| What are the elements of PARTS? | Players Added Value Rules Tactics Scope |
| PARTS: What are Players? | Who's involved in the interactions Customers, Suppliers, Substitutors, and Complements and their relationship with the company (diamond shape) |
| PARTS: How and why would you change players? | - Pay Me to Play Pay a new player to join the market to manipulate an existing player (bring in a potential supplier to get current to lower prices) - Cheap Complements Introduce players in complement to increase their value |
| PARTS: What are Added Values? | What each player brings to the table ==> portion of market you have in game - portion of market out of game - raise your own or lower others |
| PARTS: How and why would you change Added Values? | - Nintendo Power Created value by not satisfying demand to retailers, buyers lose power - Pumping up Profits Take up all of suppliers production capability, temporarily stalls major competitors |
| PARTS: What are Rules? | Gives the game structure Business has no universal set of rules Can come from law, custom, practicality, or contracts Use existing rules to their advantage, players may be able to revise them or come up with new ones |
| PARTS: How and why would you change Rules? | - Judo Strategy By staying small, the newcomer turns the incumbent’s larger size to its own benefit New come commitment to limit its capacity must be clear and credible |
| PARTS: What are Tactics? | Moves used to shape the way player perceive the game and thus how they play Designed to reduce misperceptions or designed to create or maintain uncertainty |
| PARTS: How and why would you change Tactics? | The New York Fog Play the competitor. By lowering prices a little too far in a smaller area, you can convince the competitor to INCREASE their prices, thus ruining themselves Disagreeing to Agree |
| PARTS: What is Scope? | boundaries of the game Can expand or shrink the boundaries |
| HBR: Two types of Games? | - Rule based Every action, there is a reaction To analyze other players reactions, you look far ahead at all reactions (theirs and yours) - Freewheeling Games Players interact w/o external constraints Can't take away more than you bring |
| Win-Win Strategies - Advantages | - Usually an unexplored option, greater potential for new opportunities - Others aren't = forced to give up ground, will offer less resistance - Bc no competition doesn't need to retaliate, new game is more sustainable - Imitation is beneficial |
| Mental Traps. | - Seeing only part of the game - Failing to think methodically about changing the game - Believing that success must come at others’ expense - Accepting the game as it is |
Created by:
opon12
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