ECO 550 Strayer University Game Theory essay

Game Theory-Sequential Games are Played in Business All the Time.

So what is Game Theory and how do businesses uses games?

Here is some help from Dr C. https://cdnapisec.kaltura.com/index.php/extwidget/preview/partner_id/956951/uiconf_id/38285871/entry_id/1_x4lxfbpw/embed/dynamic

In
the text, we consider a sequential-move game in which an entrant is
considering entering an industry in competition with an incumbent firm (See Figure 15-1). There
are several possibilities of how this sequential game will be played.
We want to use the Froeb rule of look ahead and reason back. Can and
how does the entrant succeed? Is the incumbent ever in control of this
game? Hint, the game is the Duopoly game explained in the video on this week’s page.

PLEASE DO NOT RELY ON WIKIPEDIA, INVESTOPEDIA OR ANY OTHER PEDIA AS A REFERENCE AT ANYTIME IN THIS COURSE.

Response from one of my peers

Week 6 Discussion Board

In
the text, we considered a sequential-move game in which an entrant was
considering entering an industry in competition with an incumbent firm
(Figure 15-1). Consider now that the entrant, if fought, has the
possibility of withdrawing from the industry (at a loss of 1 for the
entrant and a gain of 8 for the incumbent), or staying (at a loss of 5
for each player). What is the equilibrium of this game? Discuss if the
entrant is better off with or without the ability to withdraw.

In
my opinion the entrant is better without the option to withdraw. The
equilibrium game is designed to use prediction to make the best decision
for each person playing. They make a decision on what the other
opponent will do and this will then guide the entrants decision. With
equilibrium you companies can predict how to respond to competitors. If
the incumbent firm knows there is an option to withdraw they will fight
thus forcing the new entrant to withdraw while taking a loss. The new
entrant should also be aware that with this option the incumbent firm
will fight and they may experience losses. Knowing this information, it
will be better for the new entrant not to enter the market at all.
However, to refer back to the question at hand. If they enter the market
it is better not to have the option to withdraw.