The telecom war between Reliance Jio and Airtel was only a preamble to the impending battle between Google and Jio. Nitish Kumar broke the mahagathbandhan while seeming to try to bend RJD to his will. All the schmoozing between Trump and Xi hasn’t reduced the North Korean nuclear threat. Could we have predicted these outcomes before they actually happened? Yes we could have—not with IQ or EQ, but with ‘Game Theoretic Quotient’. A new intelligence, a new way of looking at the world. Game Sutra highlights the underlying strategic considerations of entities as diverse as heads of state, bitcoin miners and CEOs of internet companies to explain their decisive choices. Immerse yourself in its heady mix of cogent fact and smart analysis to develop your ‘game theoretic quotient’. Your world will never be the same again.
Chapter 13: Games Businesses Play
Games Businesses Play
This chapter deals with the application of game theory to business decision-making. The main decision variables considered are price, quantity and product differentiation. The chapter also explores, in some depth, the qualitative differences in price and quantity competition, and highlights the ‘cartelization dilemma’ that arises because agreements to cooperate are not self-enforcing.
A methodological science that aims to model the interaction of interdependent entities is well suited to analyse the interaction of firms in an oligopolistic market. In such a markets, firms are large. Hence, their actions affect the payoffs of other firms. This has to be taken into account by those firms when making decisions.
In the real world, firms have a large number of decision variables. They choose the ...