Description
MARKET STRUCTURE AND GAME THEORY
Modular Learning Outcomes
Upon successful completion of this module, the student will be able to satisfy the following outcomes:
- Analyze and test game theory strategies.
- Understand and compute Herfindahl index scores.
- Compare and contrast four alternative market structures and analyze the effects on strategic decision making.
- Conduct industry-level competitive analysis using economic concepts of market structure.
- You may have noticed the discussion in Taylor (2014) at the end of Chapter 10 about oligopoly and the prisoner’s dilemma. The prisoner’s dilemma is an example of game theory. A “game” is like a board game, as your optimal move depends on what your opponent does. The same holds in oligopoly, as your own decisions as to what price to charge or how much to produce depend on what your competitors do.Take a look at the following video that tries to illustrate oligopoly and game theory through a Batman movie: https://www.youtube.com/watch?v=JMq059SAQXM
- Find one other YouTube video on game theory and share the link with your classmates. Then discuss the following issues:
- Did the Batman video or the other video you found help explain the concept of game theory? Or was it just silly?
- Besides oligopoly, can you think of any other situations that game theory is useful for? This can be situations in the business world, in your own workplace, or even something you saw in a movie or TV show.
- What do you find easier to follow – the game theory matrices or the math equations/computations that you’ve used in this class?
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Explanation & Answer
Attached.
Running head: DISCUSSION: GAME THEORY
1
Trident University
Student’s name
Discussion: Game Theory
Course number and name
Professor’s name
Date
2
DISCUSSION: GAME THEORY
Introduction
Game theory, a strategy analysis within competitive situations, is a branch of mathematics
in which outcomes of a player’s action choice depends on the other players’ actions critically.
Game theory can be applied to various situations including business and war. In this discussion
focus in place on game theory in the context of oligopoly market structure and in the workplace.
Two videos will be analyzed in relation to their effectiveness in explaining game theory.
Discussion
Both the Batman video (ACDCLeadership, 2014) and the video found (This Place, 2014),
helped explain the concept of game theory. The Batman video explains how interdependent players
in a market are faced with decisions of conflict and cooperation in order to protect themselves. For
example, in the Batman video, DC comics and Marvel are faced with decisions that are influenced
by the other’s decision on which type of movie to produce. The same case applies to the prisoner’s
dilemma video, both cigarette companies are faced with decisions on whether to advertise or not.
Both will choose the option that will bring them more gains no matter how it affects the other
company.
According to Hennet and Arda (2008), besides oligopoly, game theory can also be useful
in is contract negotiations. These can be employee contracts, supplier contracts or whichever type
of contract in which two people are both trying to gain the most out of it. In contract negotiations,
stances taken by one party can be influenced by the stance taken by the other party, each trying to
protect their interests. I find that the game theory matrices are much easier to follow than the math
equations/computations that have been used in class. They create a visual representation of the
game theory that is easier to grasp and use for practice.
3
DISCUSSION: GAME THEORY
References
[ACDCLeadership]. (2014 Apr 27). Oligopolies and Game Theory- EconMovies #8: The Dark
Knight. [Video File]. Retrieved from
https://www.youtube.com/watch?v=JMq059SAQXM
[This Place]. (2014 October 4). The Prisoner's Dilemma. [Video File]. Retrieved from
https://www.youtube.com/watch?v=t9Lo2fgxWHw
Hennet, J. C., & Arda, Y. (2008). Supply chain coordination: A game-theory approach.
Engineering Applications of Artificial Intelligence, 21(3), 399-405.
Running head: DISCUSSION: GAME THEORY
1
Trident University
Student’s name
Discussion: Game Theory
Course number and name
Professor’s name
Date
2
DISCUSSION: GAME THEORY
Introduction
Game theory, a strategy analysis within competitive situations, is a branch of mathematics
in which outcomes of a player’s action choice depends on the other players’ actions critically.
Game theory can be applied to various situations including business and war. In this discussion
focus in place on game theory in the context of oligopoly market structure and in the workplace.
Two videos will be analyzed in relation to their effectiveness in explaining game theory.
Discussion
Both the Batman video (ACDCLeadership, 2014) and the video found (This Place, 2014),
helped explain the concept of game theory....