1 / 19

Game Theory

Game Theory. The Art of War , Sun Tzu.

cutter
Télécharger la présentation

Game Theory

An Image/Link below is provided (as is) to download presentation Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author. Content is provided to you AS IS for your information and personal use only. Download presentation by click this link. While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server. During download, if you can't get a presentation, the file might be deleted by the publisher.

E N D

Presentation Transcript

  1. Game Theory

  2. The Art of War, Sun Tzu • “Thus, it is said that one who knows the enemy and knows himself will not be endangered in a hundred engagements. One who does not know the enemy but knows himself will sometimes be victorious, sometimes meet with defeat. One who knows neither the enemy nor himself will invariably be defeated in every engagement.”

  3. Strategy Game • Each team starts with 10 armed tanks • The game consists of two 5 move rounds • During each move, a team may choose to arm or disarm 0, 1, or 2 tanks • The teams must negotiate after moves 1 and 3 • Teams may request a negotiation after any other move, but the other team must agree • Either team may attack the other team on any move except move 5 • The round is over when a team attacks

  4. Strategy Game (cont) • Objective – Score the most points possible • Points • If you attack you get 10 points for every armed tank you have in excess of the other team • At the end of round 5, if no one attacks, both teams get 5 points for each tank they have disarmed

  5. Structured Games • The game has a more formal structure: there are rules and a reasonably small set of possible outcomes • The basic rule for structured games is “to look forward to determine the outcomes and then reason backward to determine the best action”

  6. Game Theory: payoff matrix • There are two (or more) players, each of whom has a finite number of options • List the choices for each player on one of the axes • Each cell in the matrix represents the payoff (reward to a player) resulting from choosing an option assuming that the other player will choose a particular option • Usually the payoffs for both players are given in the same cell, separated by a diagonal slash or as an ordered pair (row, column)

  7. Al Joe Confess Don’t Confess Confess (-8, -8) (0, -15) Don’t Confess (-15, 0) (-1, -1) The Prisoner’s Dilemma Two vagrants, Al and Joe, have been arrested for vagrancy. The DA suspects them of complicity in a robbery, but she doesn’t have enough evidence to convict them. (Al and Joe don’t know this for sure.) The DA interrogates each of them separately and offers the following deal: “If you confess and your friend does not, you will be released and I will throw the book at your friend. I have made the same offer to your friend.” Assume the relevant prison times (in months) are as follows: How will the game turn out?

  8. Dominant Pig: Subordinate Pig: Press Don’t Press Press (1.5, 3.5) (-0.5, 6) Don’t Press (5, 0.5) (0, 0) The Rational Pigs Two pigs, one dominant and one subordinate, are in a pen. There is a lever at one end of the pen which, when pressed, dispenses 6 units of food into a trough at the other end of the pen. Thus, a pig that presses the lever must run to the other end of the pen before it can eat. By the time it gets there, the other pig may have eaten some or most of the food. The dominant pig is able to prevent the subordinate pig from getting any of the food when both are at the trough. Assume it requires energy equivalent to ½ unit of food to run from one end of the pen to the other. Suppose that if both of the pigs press the lever, the subordinate pig is faster than the dominant pig and can eat two units of food before the dominant pig gets to the food. Which pig will press the lever?

  9. Strategic Principles • Use Strategic Foresight • Know Yourself as Well as Others • Differentiate Between One-Time and Repeated Interactions • Managers Must Unify Minds to Promote Cooperation

  10. Co-opetition Combines Cooperation and Competition Cooperation affects the size of the pie Competition affects the market share --size of the slice Profitis the product of the size of the pie and the market share

  11. Customers Company Substitutors Complementors Suppliers The Value Net Source: Adam Brandenburger and Barry Nalebuff, Co-opetition (New York: Currency Doubleday, 1996), p. 17

  12. A player is your substitutor with respect to customers if customers value your productlesswhen they have the other player’s product as well A player is your complementor with respect to customers if customers value your product more when they have the other player’s product as well Customers Firm Suppliers Substitutors Complementors A player is your substitutor with respect to suppliers if it is less attractive for a supplier to provide resources to you when it is also supplying the other player A player is your complementor with respect to suppliers if it is more attractive for a supplier to provide resources to you when it is also supplying the other player The Value Net Source: Adam Brandenburger and Barry Nalebuff, Co-opetition (New York: Currency Doubleday, 1996)

  13. Threat of New Entry Rivalry Among Existing Competitors Bargaining Power of Suppliers Bargaining Power of Customers Threat of Substitutes Availability of Complements Expanded Industry Analysis

  14. Changing the game • First: Identify the players and draw the value net • Second: identify the elements of the game (PARTS) • Players, Added values, Rules, Tactics, Scope • Change one or more of these elements • No elements of the game should be considered fixed and unchangeable

  15. Boeing, Airbus and the super-jumbo airframe (1991) (A/B) Boeing Doesn’t Develop Develop Airbus (6-8+5=3/ 9-8=1) (15-3=12/ -6) Develop Doesn’t Develop (-1/12) (-2/15-8=7) Market =$15b, Development Cost=$8b, Airbus subsidy=$5b

  16. How Will the Game Turn Out? • It is the rational pig situation: Airbus has a dominant strategy: introduce the super jumbo. Boeing’s strategy depends on what Airbus does. Since Airbus will introduce, Boeing will introduce also • But Boeing’s strongly preferred solution is for neither to introduce the super jumbo so it can continue its 747 monopoly! • Therefore, Boeing must find ways to change the game!!

  17. How Boeing Has Changed the Game • Change players: Jan 1993, Boeing invites Deutsche Aerospace to be its partner in super jumbo development (Nearly splits up Airbus) (Great fun in the newspapers!!!) • Change tactics (perceptions) and added values: June 1995, Boeing announces that the market wants a supersonic—not a super jumbo (it builds neither!) • Change rules: (constantly) Petition the WTO and EU to ban subsidies to Airbus • December 1999 Airbus announces it will develop a super jumbo (None has been built, yet!) • Boeing has delayed super jumbo introduction by 9 years (so far). Value of playing the game = $117billion (9 years @ $ [12b-(-1b)]

  18. Conclusion • Use of Game Theory Helps Managers Predict Actions of Competitors • Common Framework and Language for Analysis of Competitive Decisions and Interactions

  19. Traps of Strategy • Not understanding the present game • Believing you must accept the present game • Thinking that change must come at the expense of another player (win-lose) • Believing you must do something unique • Failing to see the whole game • Failing to think methodically • Failing to think dynamically • Not expecting another player will change the game

More Related