Game Theory And Strategic Behavior Essay Sample

Type of paper: Essay

Topic: Market, Advertising, Increase, Strategy, Game, Company, Theory, Game Theory

Pages: 1

Words: 275

Published: 2020/11/08

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Game Theory and Strategic Behavior

Game theory is used in a competitive situation where an optimal decision needs to be made. This requires a strategy, which is the plan of action under the given circumstances (Camerer, 2010).If GE chooses to increase advertising so as to prevent MAYTAG from entering the market, it may succeed or fail in that strategy. MYTAG could also be considering the same and, in this case. If GE increases the advertising, MAYTAG gets little payoff since $0m<$1m thus it is not economical for MYTAG to enter the market. In this case, GE Company’s strategy works well, and MAYTAG cannot enter the market. The equilibrium outcome of the game is for GE to increase the advertising since $20m< $15m. This means that GE Company is more likely to achieve its strategy of preventing MYTAG from entering the market.
In the event that MAYTAG enters the market, an increase in advertising by GE of $2m will see more customers stop buying from MAYTAG since $2m>$1m which implies that it will be more efficient for GE to increase its advertising. This is an excellent strategy to keep MAYTAG out of the business since it will incur more in operating the company with low profits. This is evident because $35m> $15m which gives MAYTAG disadvantage of remaining in the market. For this reason, GE should increase advertising by $2m to prevent MAYTAG from entering the market. However, the additional cost of publicity by GE has the effect of reducing its profitability by $1.5m regardless of whether MAYTAG enters the market or not. For this reason, GE should not increase its advertising by $2m because it will get a less payoff.

References

Camerer, C. (2010). Behavioral game theory. New Age International.

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WePapers. (2020, November, 08) Game Theory And Strategic Behavior Essay Sample. Retrieved October 28, 2021, from https://www.wepapers.com/samples/game-theory-and-strategic-behavior-essay-sample/
"Game Theory And Strategic Behavior Essay Sample." WePapers, 08 Nov. 2020, https://www.wepapers.com/samples/game-theory-and-strategic-behavior-essay-sample/. Accessed 28 October 2021.
WePapers. 2020. Game Theory And Strategic Behavior Essay Sample., viewed October 28 2021, <https://www.wepapers.com/samples/game-theory-and-strategic-behavior-essay-sample/>
WePapers. Game Theory And Strategic Behavior Essay Sample. [Internet]. November 2020. [Accessed October 28, 2021]. Available from: https://www.wepapers.com/samples/game-theory-and-strategic-behavior-essay-sample/
"Game Theory And Strategic Behavior Essay Sample." WePapers, Nov 08, 2020. Accessed October 28, 2021. https://www.wepapers.com/samples/game-theory-and-strategic-behavior-essay-sample/
WePapers. 2020. "Game Theory And Strategic Behavior Essay Sample." Free Essay Examples - WePapers.com. Retrieved October 28, 2021. (https://www.wepapers.com/samples/game-theory-and-strategic-behavior-essay-sample/).
"Game Theory And Strategic Behavior Essay Sample," Free Essay Examples - WePapers.com, 08-Nov-2020. [Online]. Available: https://www.wepapers.com/samples/game-theory-and-strategic-behavior-essay-sample/. [Accessed: 28-Oct-2021].
Game Theory And Strategic Behavior Essay Sample. Free Essay Examples - WePapers.com. https://www.wepapers.com/samples/game-theory-and-strategic-behavior-essay-sample/. Published Nov 08, 2020. Accessed October 28, 2021.
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