SITUATION: CIVIL UNREST How is it that a small group of people can oppress a large population? Having the support of the military is certainly important, as is having con- trol of the media and economic resources. But what is arguably most im- portant is coordination failure. In a nondemocratic society, the controlling faction is […]
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How did I figure out that those six strategy profiles are equilibria? How did I figure out that those six strategy profiles are equilibria? It was not through exhaustive search (I’m far too lazy for that), but from thinking about the companies’ incentives. First, note that it cannot be an equilibrium to have three companies
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Is there a Nash equilibrium with only one entrant? Is there a Nash equilibrium with only one entrant? Once again, the an- swer is “no,” since the gross profit for the second entrant is 400 and that exceeds all companies’ entry costs. Thus, if we consider a strategy profile in which one company enters and
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HETEROGENEOUS COST OF ENTRY Company Entry Cost 1 100 2 160 3 180 4 200 5 210 TABLE 5.5 COMMON GROSS PROFIT Number of Profit per Total Industry Companies Company Profit 1 1,000 1,000 2 400 800 3 250 750 4 150 600 5 100 500 TABLE 5.6 PAYOFF TO A COMPANY FROM ENTRY Number
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SITUATION: ENTRY INTO A MARKET During the dot-com boom of the late 1990s, the online retailing scene was growing by leaps and bounds. More and more consumers were going online, and at the same time, new online services were popping up. Representative of these dynamics is FIGURE 5.7, which reports the growth in the number
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SITUATION: APPLYING FOR AN INTERNSHIP It’s the middle of the spring semester, and you’re thinking about applying for a summer internship. You’ve narrowed your prospects down to two investment banking firms: JP Morgan (JPM) in New York and Legg Mason (LM) in Baltimore. You, as well as everyone else, prefer the JPM internship, but you
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SITUATION: OPERATING SYSTEMS: MAC OR WINDOWS? Well, the idea that the more users you get, the more valuable something is, is even stronger today when it’s so easy for people to connect up and build communities. I do think it goes back [to Windows]. As more people used Windows it became sort of a standard
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EXPERIMENTAL RESULTS FOR THE WEAKEST LINK COORDINATION GAME Round 1, Percent of Subjects Round 10, Percent of Subjects Action Choosing that Action Choosing that Action 7 31% 7% 6 9% 0% 5 32% 1% 4 16% 2% 3 5% 2% 2 5% 16% 1 2% 72% In the initial round, 31% of the students chose
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SITUATION: AIRLINE SECURITY Security is only as strong as its weakest link. And so if they get on in a foreign air carrier or if they target a foreign air carrier, it is going to be—could be a ter- rible tragedy again. So we need to make sure that there is a uniform raising of
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What is a stable configuration in this society? What is a stable configuration in this society? That is, when are all sneetches content with their bellies? To answer this question requires deriving Nash equilibria. We can think of each sneetch’s strategy set as including star and nothing, and the objective is to find a strategy
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