西南民族大学：《中级微观经济学 Intermediate Microeconomics》课程教学资源（PPT课件）Chapter 7 Game Theory and Competitive Strategy

Acquiring a Company a Scenario o The value of l depends on the outcome of a current oil exploration project ◆ Failure:m” s value=$0 .Success: T s value=$100/share .All outcomes are equally likely Game Theory 西南民族大学S|ide11

Game Theory 西南民族大学 Slide 11 Acquiring a Company ◼ Scenario ⚫ The value of T depends on the outcome of a current oil exploration project. ◆Failure: T’s value = $0 ◆Success: T’s value = $100/share ◆All outcomes are equally likely

Acquiring a Company a Scenario eT s value will be 50% greater with A' S management o A, must submit the proposal before the exploration outcome is known T will not choose to accept or reject until after the outcome is known only to a How much should a offer? Game Theory 西南民族大学 Slide12

Game Theory 西南民族大学 Slide 12 Acquiring a Company ◼ Scenario ⚫ T’s value will be 50% greater with A’s management. ⚫ A, must submit the proposal before the exploration outcome is known. ⚫ T will not choose to accept or reject until after the outcome is known only to T. ◼ How much should A offer?

Dominant strategies ■ Dominant strategy o One that is optimal no matter what an opponent does An Example +a& B sell competing products They are deciding whether to undertake advertising campaigns Game Theory 西南民族大学Side13

Game Theory 西南民族大学 Slide 13 Dominant Strategies ◼ Dominant Strategy ⚫ One that is optimal no matter what an opponent does. ⚫ An Example ◆A & B sell competing products ◆They are deciding whether to undertake advertising campaigns

Payoff Matrix for Advertising Game Firm B Don’t Advertise Advertise Advertise 10,5 15,0 Firm a Don’t Advertise 6,8 10,2 Game Theory 西南民族大学 Slide14

Game Theory 西南民族大学 Slide 14 Payoff Matrix for Advertising Game Firm A Advertise Don’t Advertise Advertise Don’t Advertise Firm B 10, 5 15, 0 6, 8 10, 2

Payoff matrix for Advertising game ■0 bservations Firm B ●A. regardless Don't of B Advertise advertise advertising is the best Advertise 10.5 15,0 B: regardless Firm A of a Don't advertising ls Advertise 6,8 10.2 best Game Theory 西南民族大学Side15

Game Theory 西南民族大学 Slide 15 Payoff Matrix for Advertising Game Firm A Advertise Don’t Advertise Advertise Don’t Advertise Firm B 10, 5 15, 0 6, 8 10, 2 ◼ Observations ⚫ A: regardless of B, advertising is the best ⚫ B: regardless of A, advertising is best