Tutorial 1 MENI PDF

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Tutorial 1 MENI...

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Tutorial 1 – MENI Game Theory

Case Study Betamax a. Protagonists: Sony with Betamax and JVC with VHS are the major players, they are two standards b. Factors: (the critical mass was reached by VHS), VHS was incompatible to Betamax, family building, quickly developing, difference in technology (better capacity but lower quality), suppliers, attitude c. First-mover advantage: at the beginning there was an advantage but this advantage didn´t make use of it. d. Network effects: Indirect network effect on the demand side, as well as on the supplier side e. Sony didn´t lose but it had to adapt. Jvc won the war of standard. Sony lost profits but they still exist. f. Other examples: Blackberry, Canon..

Exercise 1 Prisoner´s Dilemma Normal form: games are played simultaneously and every player knows what´s the other player´s strategy Dominant strategy: strategy constantly lower compared to the other strategy. In this case the medium strategy dominate the other strategies. The low price strategy is dominated Nash equilibrium: when none of the players has a reason to change its strategy. All players are rational Best strategy in this game: medium-medium price Pareto efficient: The pareto efficient solution would be 600-600 Bolands Payoffs High Medium Low Starcoffee

High 600 – 600 630 - 360 315 – 360

Medium 360 – 630 450 – 450 315 – 270

Exercise 2 Game tree: sequential Strategies and players: 1. Price reduction (P), No price reduction (N) 2 2. PP, PN, NP, NN 4 Payoffs: 8 different payoffs, simple combination (4*2)

Low 360 – 315 270 - 315 225 - 225...