Decisions(策略決策)課程

Decisions(策略決策)課程TopicstobeDiscussedGamingandStrategicDecisions（策略決策）DominantStrategies（上策，占優(yōu)策略）TheNashEquilibriumRevisitedRepeatedGames（重復(fù)博弈）TopicstobeDiscussedSequentialGames（序貫博弈）Threats,Commitments,andCredibility（威懾、承諾與可信性）EntryDeterrence（進(jìn)入阻止，進(jìn)入威懾）BargainingStrategy（討價(jià)還價(jià)策略）GamingandStrategicDecisions“IfIbelievethatmycompetitorsarerationalandacttomaximizetheirownprofits,howshouldItaketheirbehaviorintoaccountwhenmakingmyownprofit-maximizingdecisions?”GamingandStrategicDecisionsNoncooperativeversusCooperativeGamesCooperativeGame（合作博弈）Playersnegotiatebindingcontracts（有約束力的契約）thatallowthemtoplanjointstrategiesExle:Buyerandsellernegotiatingthepriceofagoodorserviceorajointventurebytwofirms(i.e.MicrosoftandApple)BindingcontractsarepossibleGamingandStrategicDecisionsNoncooperativeversusCooperativeGamesNoncooperativeGameNegotiationandenforcementofabindingcontractarenotpossibleExle:Twocompetingfirmsassumingtheothersbehaviordetermine,independently,pricingandadvertisingstrategytogainmarketshareBindingcontractsarenotpossibleGamingandStrategicDecisionsNoncooperativeversusCooperativeGames“Thestrategydesignisbasedonunderstandingyouropponent’spointofview,and(assumingyouopponentisrational)deducinghowheorsheislikelytorespondtoyouractions”GamingandStrategicDecisionsAnExle:Howtobuyadollarbill 1) Auctionadollarbill 2) Highestbidderreceivesthedollarin returnfortheamountbid 3) Secondhighestbiddermustpaythe amountheorshebidQuestion:Howmuchwouldyoubidforadollar?AcquiringaCompanyScenarioCompanyA:TheAcquirerCompanyT:TheTargetAwilloffercashforallofT’ssharesWhatpricetooffer?AcquiringaCompanyScenarioThevalueofTdependsontheoutcomeofacurrentoilexplorationproject.Failure:T’svalue=$0Success:T’svalue=$100/shareAlloutcomesareequallylikelyAcquiringaCompanyScenarioT’svaluewillbe50%greaterwithA’smanagement.A,mustsubmittheproposalbeforetheexplorationoutcomeisknown.TwillnotchoosetoacceptorrejectuntilaftertheoutcomeisknownonlytoT.HowmuchshouldAoffer?DominantStrategiesDominantStrategyOnethatisoptimalnomatterwhatanopponentdoes.AnExleA&BsellcompetingproductsTheyaredecidingwhethertoundertakeadvertisingcaignsPayoffMatrixforAdvertisingGameFirmAAdvertiseDon’tAdvertiseAdvertiseDon’tAdvertiseFirmB10,515,010,26,8PayoffMatrixforAdvertisingGameFirmAAdvertiseDon’tAdvertiseAdvertiseDon’tAdvertiseFirmB10,515,010,26,8ObservationsA:regardlessofB,advertisingisthebestB:regardlessofA,advertisingisbestPayoffMatrixforAdvertisingGameFirmAAdvertiseDon’tAdvertiseAdvertiseDon’tAdvertiseFirmB10,515,010,26,8ObservationsDominantstrategyforA&BistoadvertiseDonotworryabouttheotherplayerEquilibriumindominantstrategyDominantStrategiesGameWithoutDominantStrategyTheoptimaldecisionofaplayerwithoutadominantstrategywilldependonwhattheotherplayerdoes.10,515,020,26,8FirmAAdvertiseDon’tAdvertiseAdvertiseDon’tAdvertiseFirmBModifiedAdvertisingGame10,515,020,26,8FirmAAdvertiseDon’tAdvertiseAdvertiseDon’tAdvertiseFirmBModifiedAdvertisingGameObservationsA:Nodominantstrategy;dependsonB’sactionsB:AdvertiseQuestionWhatshouldAdo?(Hint:considerB’sdecisionTheNashEquilibriumRevisitedDominantStrategies“I’mdoingthebestIcannomatterwhatyoudo.”“You’redoingthebestyoucannomatterwhatIdo.”TheNashEquilibriumRevisitedNashEquilibrium“I’mdoingthebestIcangivenwhatyouaredoing”“You’redoingthebestyoucangivenwhatIamdoing.”ExlesWithANashEquilibriumTwocerealcompaniesMarketforoneproducerofcrispycerealMarketforoneproducerofsweetcerealEachfirmonlyhastheresourcestointroduceonecerealNoncooperativeTheNashEquilibriumRevisitedProductChoiceProblemProductChoiceProblemFirm1CrispySweetCrispySweetFirm2-5,-510,10-5,-510,10ProductChoiceProblemFirm1CrispySweetCrispySweetFirm2-5,-510,10-5,-510,10QuestionIsthereaNashequilibrium?Ifnot,why?Ifso,howcanitbereachedBeachLocationGameScenarioTwocompetitors,YandC,sellingsoftdrinksBeach200yardslongSunbathersarespreadevenlyalongthebeachPriceY=PriceCCustomerwillbuyfromtheclosestvendorBeachLocationGameWherewillthecompetitorslocate(i.e.whereistheNashequilibrium)?Ocean0BBeachA200yardsCBeachLocationGame 2) Exlesofthisdecisionproblem include:LocatingagasstationPresidentialelectionsOcean0BBeachA200yardsCTheNashEquilibriumRevisitedMaximinStrategies（最大最小策略）ScenarioTwofirmscompetesellingfile-encryptionsoftwareTheybothusethesameencryptionstandard(filesencryptedbyonesoftwarecanbereadbytheother-advantagetoconsumers)TheNashEquilibriumRevisitedMaximinStrategiesScenarioFirm1hasamuchlargermarketsharethanFirm2BothareconsideringinvestinginanewencryptionstandardMaximinStrategyFirm1Don’tinvestInvestFirm20,0-10,1020,10-100,0Don’tinvestInvestMaximinStrategyFirm1Don’tinvestInvestFirm20,0-10,1020,10-100,0Don’tinvestInvestObservationsDominantstrategyFirm2:InvestNashequilibriumFirm1:investFirm2:InvestMaximinStrategyFirm1Don’tinvestInvestFirm20,0-10,1020,10-100,0Don’tinvestInvestObservationsIfFirm2doesnotinvest,Firm1incurssignificantlossesFirm1mightplaydon’tinvestMinimizelossesto10:maximinstrategyIfbotharerationalandinformedBothfirmsinvestNashequilibriumTheNashEquilibriumRevisitedMaximinStrategyConsiderIfPlayer2isnotrationalorcompletelyinformedFirm1’smaximinstrategyistonotinvestFirm

2’smaximinstrategyistoinvest.If1knows2isusingamaximinstrategy,1wouldinvestTheNashEquilibriumRevisitedMaximinStrategyPrisoners’DilemmaPrisonerAConfessDon’tConfessConfessDon’tConfessPrisonerB-5,-5-1,-10-2,-2-10,-1Prisoners’DilemmaPrisonerAConfessDon’tConfessConfessDon’tConfessPrisonerB-5,-5-1,-10-2,-2-10,-1Whatisthe:DominantstrategyNashequilibriumMaximinsolutionPureStrategy（純策略）PlayermakesaspecificchoiceMixedStrategy（混合策略）PlayermakesarandomchoiceamongtwoormorepossibleactionsbasedonasetofchosenprobabilitiesTheNashEquilibriumRevisitedMixedStrategyMatchingPennies（猜硬幣）PlayerAHeadsTailsHeadsTailsPlayerB1,-1-1,11,-1-1,1MatchingPenniesPlayerAHeadsTailsHeadsTailsPlayerB1,-1-1,11,-1-1,1ObservationsPurestrategy:NoNashequilibriumMixedstrategy:RandomchoiceisaNashequilibriumWouldafirmsetpricebasedonrandomchoiceassumption?TheBattleoftheSexesBoyFootballMovieFootballMovieGirl2,10,01,20,0TheBattleoftheSexesBoyFootballMovieFootballMovieGirl2,10,01,20,0PureStrategyBothplay(watch)footballBothwatchmovieMixedStrategyBoychoosesfootballGirlchoosesmovieRepeatedGamesOligopolisticfirmsplayarepeatedgame.WitheachrepetitionofthePrisoners’Dilemma,firmscandevelopreputationsabouttheirbehaviorandstudythebehavioroftheircompetitors.PricingProblemFirm1LowPriceHighPriceLowPriceHighPriceFirm210,10100,-5050,50-50,100PricingProblemFirm1LowPriceHighPriceLowPriceHighPriceFirm210,10100,-5050,50-50,100Non-repeatedgameStrategyisLow1,Low2RepeatedgameTit-for-tatstrategyisthemostprofitableRepeatedGamesConclusion:WithrepeatedgameThePrisoners’Dilemmacanhaveacooperativeoutcomewithtit-for-tatstrategyRepeatedGamesConclusion:Thisismostlikelytooccurinamarketwith:FewfirmsStabledemandStablecostRepeatedGamesConclusionCooperationisdifficultatbestsincethesefactorsmaychangeinthelong-run.OligopolisticCooperation

intheWaterMeterIndustryCharacteristicsoftheMarketFourProducersRockwellInternational(35%),BadgerMeter,NeptuneWaterMeterCompany,andHerseyProducts(Badger,Neptune,andHerseycombinedhaveabouta50to55%share)OligopolisticCooperation

intheWaterMeterIndustryCharacteristicsoftheMarketVeryinelasticdemandNotasignificantpartofthebudgetOligopolisticCooperation

intheWaterMeterIndustryCharacteristicsoftheMarketStabledemandLongstandingrelationshipbetweenconsumerandproducerBarrierEconomiesofscaleBarrierOligopolisticCooperation

intheWaterMeterIndustryCharacteristicsoftheMarketThisisaPrisoners’DilemmaLowerpricetoacompetitivelevelCooperateRepeatedGameQuestionWhyhascooperationprevailed?CompetitionandCollusion

intheAirlineIndustryWhatDoYouThink?Istherecooperation&collusionintheairlineindustry?SequentialGamesPlayersmoveinturnPlayersmustthinkthroughthepossibleactionsandrationalreactionsofeachplayerSequentialGamesExlesRespondingtoacompetitor’sadcaignEntrydecisionsRespondingtoregulatorypolicyScenarioTwonew(sweet,crispy)cerealsSuccessfulonlyifeachfirmproducesonecerealSweetwillsellbetterBothstillprofitablewithonlyoneproducerSequentialGamesTheExtensiveForm（擴(kuò)展形）ofaGameModifiedProductChoiceProblemFirm1CrispySweetCrispySweetFirm2-5,-510,20-5,-520,10ModifiedProductChoiceProblemFirm1CrispySweetCrispySweetFirm2-5,-510,20-5,-520,10QuestionWhatisthelikelyoutcomeifbothmaketheirdecisionsindependently,simultaneously,andwithoutknowledgeoftheother’sintentions?AssumethatFirm1willintroduceitsnewcerealfirst(asequentialgame).QuestionWhatwillbetheoutcomeofthisgame?ModifiedProductChoiceProblemTheExtensiveFormofaGameSequentialGamesTheExtensiveFormofaGameUsingadecisiontree（決策樹）WorkbackwardfromthebestoutcomeforFirm1TheExtensiveFormofaGameProductChoiceGameinExtensiveFormCrispySweetCrispySweet-5,-510,2020,10-5,-5Firm1CrispySweetFirm2Firm2SequentialGamesTheAdvantageofMovingFirstInthisproduct-choicegame,thereisaclearadvantagetomovingfirst.SequentialGamesAssume:DuopolyTheAdvantageofMovingFirstSequentialGamesDuopolyTheAdvantageofMovingFirstChoosingOutputFirm17.5Firm2112.50,112.5056.25,112.500,0112.50,56.25125,93.7550,7593.75,12575,50100,10010157.51015ChoosingOutputFirm17.5Firm2112.50,112.5056.25,112.500,0112.50,56.25125,93.7550,7593.75,12575,50100,10010157.51015ThispayoffmatrixillustratesvariousoutcomesMovetogether,bothproduce10QuestionWhatifFirm1movesfirst?Threats,Commitments,andCredibilityStrategicMovesWhatactionscanafirmtaketogainadvantageinthemarketplace?DeterentryInducecompetitorstoreduceoutput,leave,raisepriceImplicitagreementsthatbenefitonefirmThreats,Commitments,andCredibilityHowToMaketheFirstMoveDemonstrateCommitmentFirm1mustconstrainhisbehaviortotheextentFirm

2isconvincedthatheiscommittedThreats,Commitments,andCredibilityEmptyThreats（空頭威脅）Ifafirmwillbeworseoffifitchargesalowprice,thethreatofalowpriceisnotcredibleintheeyesofthecompetitors.PricingofComputers

andWordProcessorsFirm1HighPriceLowPriceHighPriceLowPriceFirm2100,8080,10010,2020,0PricingofComputers

andWordProcessorsFirm1HighPriceLowPriceHighPriceLowPriceFirm2100,8080,10010,2020,0QuestionCanFirm1forceFirm

2tochargeahighpricebythreateningtoloweritsprice?Threats,Commitments,andCredibilityScenarioRaceCarMotors,Inc.(RCM)producescarsFarOutEngines(FOE)producesspecialtycarenginesandsellsmostofthemtoRCMSequentialgamewithRCMastheleaderFOEhasnopowertothreatentobuildbigsinceRCMcontrolsoutput.ProductionChoiceProblemFarOutEnginesSmallcarsBigcarsSmallenginesBigenginesRaceCarMotors3,63,08,31,1QuestionHowcouldFOEforceRCMtoshifttobigcars?Threats,Commitments,andCredibilityModifiedProductionChoiceProblem0,60,08,31,1FarOutEnginesSmallcarsBigcarsSmallenginesBigenginesRaceCarMotorsQuestions 1) Whatistheriskofthisstrategy? 2) Howcouldirrationalbehaviorgive FOEsomepowertocontroloutput?ModifiedProductionChoiceProblemWal-MartStores’

PreemptiveInvestmentStrategyQuestionHowdidWal-MartbecomethelargestretailerintheU.S.whenmanyestablishedretailchainswereclosingtheirdoors?HintHowdidWal-Martgainmonopolypower?PreemptivegamewithNashequilibriumTheDiscountStorePreemptionGameWal-MartEnterDon’tenterEnterDon’tenterCompanyX-10,-1020,00,00,20TheDiscountStorePreemptionGameWal-MartEnterDon’tenterEnterDon’tenterCompanyX-10,-1020,00,00,20TwoNashequilibriumLowleftUpperrightMustbepreemptivetowinEntryDeterrenceTodeterentry,theincumbentfirm（在位企業(yè)）mustconvinceanypotentialcompetitorthatentrywillbeunprofitable.EntryPossibilitiesIncumbentEnterStayoutHighprice(accommodation)LowPrice(warfare)PotentialEntrant100,20200,0130,070,-10EntryDeterrenceScenarioIncumbentmonopolist(I)andprospectiveentrant(X)Xsinglecost=$80milliontobuildplantEntryDeterrenceScenarioIfXdoesnotenterImakesaprofitof$200million.IfXentersandchargesahighpriceIearnsaprofitof$100millionandXearns$20million.If

XentersandchargesalowpriceIearnsaprofitof$70millionandXearns$-10million.EntryDeterrenceQuestionHowcouldIkeepXout? Isthethreatcredible?EntryDeterrenceHowcouldIkeepXout? 1) Makeaninvestmentbeforeentry (irrevocablecommitment) 2) IrrationalbehaviorEntryDeterrenceIncumbentEnterStayoutHighprice(accommodation)LowPrice(warfare)PotentialEntrant50,20150,0130,070,-10After$50millionEarlyInvestmentEntryDeterrenceIncumbentEnterStayoutHighprice(accommodation)LowPrice(warfare)PotentialEntrant50,20150,0130,070,-10After$50millionEarlyInvestmentWarfarelikelyXwillstayoutAirbusvs.BoeingWithoutAirbusbeingsubsidized,thepayoffmatrixforthetwofirmswoulddiffersignificantlyfromoneshowingsubsidization.EntryDeterrenceDevelopmentofaNewAircraftBoeingProduceDon’tproduceAirbus-10,-10100,00,00,120ProduceDon’tproduceDevelopmentofaNewAircraftBoeingProduceDon’tproduceAirbus-10,-10100,00,00,120ProduceDon’tproduceBoeingwillproduceAirbuswillnotproduceDevelopmentofaAircraft

AfterEuropeanSubsidyBoeingProduceDon’tproduceAirbus-10,10100,00,00,120ProduceDon’tproduceDevelopmentofaAircraft

AfterEuropeanSubsidyBoeingProduceDon’tproduceAirbus-10,10100,00,00,120ProduceDon’tproduceAirbuswillproduceBoeingwillnotproduceDiaperWarsEventhoughthereareonlytwomajorfirms,competitionisintense.Thecompetitionoccursmostlyintheformofcost-reducing

innovation.CompetingThroughR&DP&GR&DNoR&DR&DNoR&DKimberly-Clark40,2080,-2060,40-20,60CompetingThroughR&DP&GR&DNoR&DR&DNoR&DKimberly-Clark40,2080,-2060,40-20,60BothspendonR&DQuestionWhynotcooperateBargainingStrategyAlternativeoutcomesarepossibleiffirmsorindividualscanmakepromisesthatcanbeenforced.BargainingStrategyConsider:Twofi