Week 1

Sequential Games I
Game Setting

Chocolate Wars

Universal Studio charges $1.0mn for a product placement

Product placement by Mars Mars gross profits increase by $0.8mn Hersheys decrease by $0.1mn Product placement by Hershey Hersheys gross profits increase by $1.2mn Mars decrease by $0.5mn No product placement: business as usual

Game Tree (I/II)

First decision starts the game

Every decision point represents a node

From there, the decisions of subsequent players branch out accordingly

Game Tree (II/II)

Mars product placement status quo no product placement product placement

Hershey

no product placement

Mars Hershey

$ -0.5mn $ 0.2 mn

$0 $0

Strategy (I/II)
(Extended) Working definition for this course:
A players plan of actions in a game, given any possible circumstance

Strategy (II/II)
Example: Price Setting
Firm A

Potential strategies for B

low

high

Firm B high low high low

Competitive Strategy
Tobias Kretschmer
Professor of Management, LMU Munich

2013 LMU Munich