This website uses cookies to ensure you have the best experience. Learn more

Game Theory Essay

402 words - 2 pages

Game theory is the method utilized to understand the behavior of oligopolies or market situations in which each of a few producers affects but does not control the market. Unlike monopolies in which a company has complete control of the entire supply of goods and/or services in a certain market, oligopolies do have competitors with in the market. However, unlike monopolistically competitive firms and perfectly competitive firms, firms within a oligopolistic frame work have so few competitors that marketing and pricing decisions made by one firm has a very unique possibility of affecting all the other ...view middle of the document...

Both companies have the possibility of obtaining a big payoff by charging a minimal price while its competitor charges an elevated price, but both companies know that if one of them cuts it price the other will quickly follow suit, resulting in a smaller payoff for both. The resulting equilibrium is both companies charging a high price and engaging instead in non-price competition.
Coke vs. Pepsi Payoff Matrix


Pepsi charges high price
Pepsi charges low price

Coke charges high price Coke makes large profit
Pepsi makes large profit Coke takes a loss
Pepsi makes very large profit

Coke charges low price Coke makes very large profit
Pepsi takes a loss Coke makes small profit
Pepsi makes small profit

In conclusion, game theory predicts that the companies will match each other's moves: if the products of Coke are endorsed by a pro athlete, Pepsi will in turn try to possibly a TV star. If Coke decides to change its formula, Pepsi will launch an all-out media blitz to make fun of it. To bring it closer to home, if Coke sponsors the Disney for example, Pepsi will sponsor the Universal Studios. The conclusion that needs to be made is this: in an oligopoly, failure by a company to react to its competitor's strategic move will allow its competitor to capture market share and increase its profits. In this case, both companies benefit from each others existence and neither company should have acted any differently.

Other assignments on Game Theory

Oligopoly And Monopolistic Competition And Product Differentiation

660 words - 3 pages , false or ambiguous with respect to each of the criteria listed under a, b, c, and d. Justify your answers. a. The price charged to consumers b. The average total cost of production c. The efficiency of the market outcome d. The typical firm’s profit in the long run --------------------- References: |Microeconomics: Unit 8 Assignment: Game Theory and Perfect Competition and monopolistic competition in

Work Essay

965 words - 4 pages eat for dinner. Now one assumption in the Spiral of Silence theory is that the “publics behavior is influenced by evaluations of public opinion.” In simpler terms it means someone stays silent or speaks out. I’m sure every family does the “what do you want for dinner” game, and everyone states what they want. But when I was younger I knew that I had no choice because my opinion was not the dominant one. My mom always wanted Mexican food first

Assignment 1: Logic Application

608 words - 3 pages Assignment 1: Logic Application Andy, Belle, Carol, and I are playing the game Guess Your Card. In the game, each person draws three cards without looking from a stack of cards containing contain multiple cards ranging in denomination from one to nine. Each person then places the cards on his or her forehead so that all of the other players can see the others’ cards, but cannot see their own. There is also a stack of questions that each person

Music And Cognition

1158 words - 5 pages Henley, and Robert Markley (2007) wanted to see if the “Mozart Effect” could be an artifactual consequence of heightened arousal and mood rather than the actual music of Mozart. Which would disprove Rauscher, Shaw, and Ky (1993) theory that arousal does not have an effect on spatial reasoning tasks. They wanted to see if there were performance improvements in a scored computer game that are consistent with the mood and arousal hypothesis

Marketing Plan

1924 words - 8 pages , Sim Venture also comes with a "save and load" function and allows the user to print a range of important reports. As an educational tool, it is essential to promote entrepreneurship education by integrating theory and practice within the game (Ruben, 1999). Unlike other online educational tools, users are allowed to access the game even when they cannot connect to the internet. Besides that, Sim Venture provides a series of unexpected events

Hacking

5164 words - 21 pages industry but they are often been blamed of being thieves and are blamed for destroying the gaming industry. There are couple of reasons why video game piracy is going on and isn’t as bad as the media portrays it. Kotuka.com released an article and an theory stating that most of the gamers who use pirated games are less likely to afford console and pc games. But that is still no excuse for these pirates to go and pirate these games without giving

Reflection Paper

1226 words - 5 pages importance of the integration of our goals and our capabilities. It was probably the first time that the students as the future managers, CEO’s, CFO’s were able to experience such a realistic trial of business world with its constraints. The main goal of the game was minimizing the bulk effect which comes with the fluctuations of demand and the prices. it can be claimed that in theory, the bulk effect can be minimized with the opportunities of

Supply Chain

1630 words - 7 pages • Inventory control costs Scale economics won’t drop down the price on such airbus related materials, and without uncertainty or speculation of any sort in such a market (on a short term basis), with a lack of need on controlling the costs of inventory, one theory remains key to the airbus manufacturing process, that theory that states that Airbus was born due to the proximity of the EU countries and so the geographical constraints are very

Micro Economics Mcq

2116 words - 9 pages :  A. Legal in the United States B. Not possible when firms interact repeatedly forever C. More likely in industries with a large number of firms D. None of the statements associated with this question are correct Answer:  33. Game theory is especially useful for analysis in the following types of markets:  A. Perfect competition B. Monopolistic competition C. Oligopoly D. Monopoly Answer:  34. Economists use game theory to predict the

Motivation

8449 words - 34 pages motivation 2.3 Push and pull 2.4 Self-control 2.5 Drives 2.6 Incentive theory 2.7 Escape-seeking dichotomy model 2.8 Drive-reduction theory 2.9 Cognitive dissonance theory 2.10 Content theories 2.10.1 Maslow's hierarchy of needs 2.10.2 Herzberg's two-factor theory 2.10.3 Alderfer's ERG theory 2.10.4 Self-determination theory

Real Estate

1490 words - 6 pages Negotiation Theory & Practice Michael Alvarez Stanford School of Medicine Career Center Julie Matlof Kennedy Gould Center for Conflict Resolution, Stanford © 2005 Morrison & Foerster LLP All rights reserved February 16, 2006 Definition American Heritage Dictionary • Negotiation (v.) To confer with another or others in order to come to terms or reach an agreement. (1.) To arrange or settle by discussion and mutual agreement

Similar Documents

The Meaning Of Interpretivism Essay

423 words - 2 pages . Interpretivism theory has the principles and theories so it makes it possible to see the sport from an appeal to best interpretation of the game. This theory moves the game closer to moral good and helps people move away from seeing the game in a less than best interpretation. The rules, skills and ethos of a sport is based on the principles and theories of interpretivism. Interpretivism can be used to help sport communities figure out

Adult Learner Essay

279 words - 2 pages , and the local culture. Number two is informal theory. Individuals who use informal theories still acquire their metacognition skills over time from their peers and their environment. For the adult students their informal metacognitive strategies develop in the workplace environment and which brings together intelligence, experience, and reflection. Number three is formal theory which is the theoretical modeling of social system based on game

Strategic Management Essay

1180 words - 5 pages Porter five forces analysis? 25. When does each of the five forces have power? Know when buyers, suppliers, new entrants, and substitutes are powerful. 26. What is coopetition? 27. In game theory what are substitutors and complementors? In 5 forces- substitutes are outside of the industry. (Indirect competitors) Beer for pepsi or water for pepsi In game theory anything that's an alternative is a substitute (direct competitors) Coke for

Sport Science Level 3 Essay

4892 words - 20 pages a game of contact and team sport which is correct as I play rugby. Another reason why I do not agree is because I have taken the test for this, and did not agree with the results. The results are at the back of my work. Social learning theory – the social learning theory is the theory that your personality is created from being in a certain environment and being around certain people. For example, if a child grew up with a family of loud and