Application Of Game Theory In Strategic Formulation Marketing Essay

Application Of Game Theory In Strategic Formulation Marketing Essay This particular article talks about the application of game theory in the business world. In todays highly competitive market it has become harder and more complicated to decide about the pricing strategies and budgeting of the advertisements. This article explains the concept of game strategy with various examples. Keywords: strategy, pay offs, prisoners dilemma. Introduction Game theory, a branch of  applied mathematics  that is used in the  social sciences, most notably in  economics, biology, engineering, political science,  international relations,  computer science, and  philosophy attempts to mathematically capture behavior in strategic situations or  games, in which an individuals success in making choices depends on the choices of others. While initially developed to analyze competitions in which one individual does better at anothers expense (zero sum games), it has been expanded to treat a wide class of interactions, which are classified according to several  criteria. Today game theory is widely used in the business for solving situations in which there are a number of players. Companies are using the science of Game Theory to help them make complicated strategic decisions in this highly competitive market with least possible risk. History of Modern Game Theory is more than 50 years old and has demonstrated an  ability to  generate the ideal strategic  choice in a variety of different situations, companies and industries. Principles of game theory are applied through the use of strategy games.   Game theory and its applications: A powerful tool for predicting outcomes of a group of interacting  firms where an action of a single  firm directly affects the payoff of other participating players. Enables  a company  to formulate their optimal strategy. Ideal for strategic situations where competitive or individual behaviors can be modeled.   For example:   Auctions (sealed project bids), Bargaining activities (union management negotiations), Product decisions (entry or exit markets), Principal-agent decisions (compensation negotiations, supplier incentives) and Supply chain design (capacity management, build vs. out source decisions). Multiple strategy games are analyses to  model different competitors, various payoffs  and potential strategies.   The objective of these games is to deliver A recommended set of strategic  decisions to guide competitive behavior to a desirable outcome, and; An analysis of how a series of possible strategic moves can predict various competitive outcomes.   Various types of games can be used and analysed based on the strategic situation, the number of players, the amount of  information available  and the timing constraints. Classification of game theory: There are basically three types of games Fully co- operative game: to explain this game we can take the example of two cyclists coming towards each other. it is in their best interest to avoid the collision and If they have to avoid the collision each of them has three strategies: move right move left maintain direction The strategy followed by one person in this case depends on the other person. As they both dont want a collision they will change their direction based on the opponents strategy. This type of game is called full co operative game. Zero sum non co operative game: to explain this case we can take the example of the retail outlets in one locality. All of them use different pricing strategy to attract customer. in this case if store is able to attract customers it is on the account of the other retail store. In this particular case a strategy followed by one player affects the other player always. In simple words the win of one person comes on the account of other persons loss. Mixed strategy game: this type of game explains the situation where the interests of both the player are interdependent. But they are partly opposed and partly coincident. This kind of strategy is followed mostly in the case of union management feuds. In the case of union and the management their benefits are interrelated. At the same time they have conflicting interests as well. Other classification: game theory has been divided into following categories: Static games: this basically deals with anticipating rivals move. These kind of games involve pricing strategy, prisoners dilemma, the concept of dominant strategy, fixing up of advertisement budget etc. Dynamic games: deals with the concept of perfect and sub perfect games. Prisoners dilemma: Below given diagram depicts the prisoner dilemma. Figure 3: Prisoners dilemma Prisoners dilemma is a beautiful concept of game theory that explains various complications that firms face while taking the decision regarding fixing the price or on deciding on the budget for the advertisement. The evidence available with police is not sufficient enough to convict these criminals to convict. Though they are supposed to get 20 years of imprisonment if the crime is proved, they will get only one year of imprisonment if the crime is not proved. if they apply the best strategy they both can avoid the conviction. The strategies that they can follow are: A confesses B remains silent: A gets an imprisonment of 5 years and B gets an imprisonment of 20 years. B confesses A remains silent: B gets an imprisonment of 5 years and A of 20 years. Both of them confess: both get an imprisonment of 5 years. Both remain silent: both get an imprisonment of 1 year. The dilemma here is that they dont know about each others strategy and they end up confessing the crime as both of them want to avoid the 20 year of imprisonment. But if they know about the strategy of the opponent they can decide about their strategy and can get best equilibrium possible that is one year for both of them. The same theory applies for many firms in the corporate world and they end up choosing the wrong strategy because of the opponent or the apprehensions in their mind. The Concept of Dominant Strategy: Dominant strategy is the strategy followed by any player that will supersede all the strategies followed by the opponent. Eliminating Dominant Strategy: It will in the best of interests of both the rivals to eliminate the dominant strategy. One beautiful example of this is the OPEC. Nash Equilibrium: A Nash equilibrium is a combination of strategies such that no individual player can deviate unilaterally from his or her to improve his pay offs. Few examples of game theory in the practical corporate world: Price wars: this can be explained by the following example: imagine there are two pizza providers in the city and they have different pricing policies namely- high, low and medium. There are two restaurants in a small town, pizza hut and dominos. They are in competition with each other for customers. They have three price slabs: high (H), medium (M) or low (L). The customer base is 1,000 of which 300 only ever buy at Dominos and 300 only buy at Pizza hut. The other 400 are price-sensitive and always buy the cheaper pizza and choose at random if they charge the same price. Both providers make a margin of  £12 per pizza if they charge high prices,  £10 per pizza if they charge medium prices, and  £5 for low prices. Both Dominos and Pizza hut cannot guess what the other player has chosen before they choose themselves. We can calculate profits by multiplying the number of customers with the margin per customer. For example, if dominos charges a medium price and Pizza hut a high price, Dominos will sell to his 300 loyal customers and the 400 price sensitive customers at a margin of  £10 each, giving him pay-offs of  £7,000. Pizza hut only sells to his 300 loyal customers, but at a margin of  £12 per pizza, giving him p rofits of  £3,600. Figure 2: pricing war between two suppliers PgIn this case three equilibrium arises one of 6/6 , 5/5 other one of 2.5/2.5. the noble picture for both the firms is 6/6 but becausee of the price wars between them none of them are able to extract ad No ad Ad wars: No ad $5m colgate $5,m $5.5m, $2m Ad $2m $5.5m $2.5m $2.5m Figure 3: advertising war between P G and Colgate This particular situation is of the two brands of toothpastes in which both of them follow different ad strategies. The decision of going for an ad and not going for an ad depends upon the opponent. They have four possible strategies: Both of them go for ad None of them go for ad P G goes for ad but colgate does not go for ad Colgate goes for ad but P G not. In two cases the equilibrium exists one for 5,5, and the other for 2.5, 2.5. the firms can make more money without going for any ad but as both the firms want to capture the non loyal market they go for ads and finally end up by lower margins. The dilemma here is that if one firm does not go for the ad and the other goes, then it will lose money. So guessing rivals move becomes very important here. Assumptions: Players and rational and they select strategies based on their interest. The market is equally divided in the players. Other factors are constant. Shortcomings of Game Theory: Game theory has many short comings as well and that needs to be considered. Assumes the players are rational and they play in their self-interest.  This might not be the case all the time. Assumes players act strategically and consider the competitive responses of their actions. But every manager does not think within a strategic context.   The concept of Game Theory is most effective when managers understand the expected outcomes of the strategies they are following and the strategy that their competitors will follow.   To be little precise most of the companies often do not have enough knowledge of their own payoffs let alone those of their  competition. Despite  its shortcomings, a properly constructed game can perceptibly reduce business risk, can produce valuable competitive insights, improve internal alignment  around decisions  and maximize strategic utility. According to the  The Economist  magazine Managers have much to learn from game theory provided they use it to clarify their thinking, not as a substitute for business experience. Conclusion: Game theory is a beautiful concept of applied mathematics. Though it has got shortcomings and its assumptions might not be applicable in all the cases it can help firms and industries in finding the appropriate strategies. Based on the pay offs, number of players and other strategic situations game theory can be helpful in developing the optimum strategies for the firms. .

Looking Back at Adolescence Essay -- Adolescent Behavior

Adolescence is a part of growing up between leaving the childish ways behind and slowly preparing more mature roles as an adult. This is a very confusing part of growing up because this is a time were we are trying to find our identity, creating our long term goals, and making decisions that may affect our lives forever. This can also be characterized as a part where we are trying to fit in a society which we feel we belong because we share the same experiences, thoughts and feelings. Also in this time, some are experimenting on things that come their way. Some of these things lead them to complicated situations. Still some are engaging into smoking, drinking and worst drugs that fatally affect their academic responsibilities. We adolescents grow in a very different setting than the generation before us. We are greatly exposed to technology that teaches us many things. If you open your personal computer at home and start browsing, pornography is just one click away. Too much technology kills us. Everything we might need is already spoon feed to us. I never mean that tech...

Inidividualism in the Early Modern Period

â€Å"Individualism and the Early Modern Period† For much of the world, the Early Modern period (from about 1500-1700) was a revolutionary time, marked by political, scientific and literary transitions. Politically, nations began to resist outside rule and establish their own national languages. Scientifically, the idea of a heliocentric universe (rather than a geocentric one) began to gain favor as Polish astronomer Nicolas Copernicus challenged tradition and church doctrine. In Europe, the invention of printing brought about a literary explosion.Books and texts could be mass-produced, making them much more affordable. Suddenly, one did not have to be of a certain socioeconomic status to have access to books. Writers saw the incredible potential of printing and ran with it, incorporating newly-available vernacular languages into their writing. The printing press opened up a world of seemingly endless possibility. The Early Modern period was marked by a resistance to (and some times rejection of) the status quo. Traditions were challenged, questioned, and sometimes abandoned.It was this heady atmosphere that gave rise to individualism. Individualism The American Heritage Dictionary defines individualism as â€Å"a social theory advocating the liberty, rights, or independent action of the individual. † The Early Modern period represents a shift in emphasis from the group dynamic (most notably the church) to the worth of the individual person. The thoughts, desires, goals and value of the individual gained significantly in importance, and one of the areas in which this shift is most readily apparent is in the world of literature.Niccolo Machiavelli was not necessarily revered as a writer during his lifetime, but from a literary standpoint, he was definitely a man of his time, and he illustrates this in his 1513 work, The Prince. Machiavelli and The Prince Machiavelli grew up during the peaceful Italian Renaissance, as Florence was becoming one of the leading cities in the areas of art and philosophy rather than placing an emphasis on military might and political savvy. Consequently, when King Charles VIII of France invaded Italy, the Florentines offered little resistance.Machiavelli, who became an employee of the Florentine Republic in 1498, helped his fellow citizens form a militia to avoid a similar defeat. It didn’t help; Spain invaded in 1512, and the Florentines again failed to offer much resistance. Machiavelli began writing his book, The Prince, the year after the Spanish invasion. The book, which is still reviled in some circles, is a treatment of the use of power to create, control, and protect a principality. It illustrates Machiavelli’s belief that Florence needed a strong ruler to avoid any more humiliating defeats.The Prince and Individualism The author’s approach to individualism is quite straightforward. In The Prince, Machiavelli writes of the need for a ruler who is unafraid to use his powe r to advance his own causes. The ruler, according to Machiavelli, was to be cruel when necessary, deceitful when warranted, and willing to use terror to keep people in line (including his own). The author uses historical examples to illustrate his belief that a ruler establishes his strength by first establishing ironclad control over his own people — by force, if necessary. Had Moses, Cyrus, Theseus and Romulus been unarmed,† he writes, â€Å"they would not have had their institutions respected by the people for very long. † (Machiavelli, p. 1505) Machiavelli’s view on individualism is hard and fast; the individual – that is, the prince – comes first, above all others. Machiavelli also uses tone to great effect in The Prince. The author did not seem to consider his book to be a piece of literature. Rather, he intended for it to be a how-to guide for an effective ruler.His formal tone is apparent right away in his opening â€Å"Dedicatory Le tter,† in which he states his qualifications for writing such a treatise (Machiavelli knew Pope Alexander VI, King Louis XII, and Girolamo Savonarola among others, and considered himself eminently qualified to speak to the proper uses of power): â€Å"I have not found among my possessions anything I cherish more or value so much as my knowledge of the accomplishments of great men, which I learned through long experience in contemporary affairs and continuous study of antiquity. (p. 1503) Here, too, does Machiavelli’s approach to individualism show through; he is telling the new prince that his thoughts and ideas matter, and that they should be taken seriously if not heeded outright. Machiavelli vs. Other Early Individualist Authors Although Machiavelli probably would not be considered on the same literary plane as William Shakespeare or Petrarch, it is instructive to compare their differing approaches to individualism.Shakespeare, though known primarily as a playwright , was also the author or more than 150 sonnets. In them, Shakespeare approaches individualism in a much different way than Machiavelli, focusing on the importance of emotion. His â€Å"Sonnets† focuses on love, sexual desire, and finally, heartbreak. Petrarch’s â€Å"Canonziere† also places emphasis on the feelings of the individual. Canonziere† is a love poem in which the narrator sings praises of the love of his life, Laura, lamenting her death, and holds out hope for a reunion after he himself passes away. Machiavelli’s view on individualism is starkly different from Shakespeare, Petrarch, and other individualistic authors of his day, but in its own way, it is just as representative of the times. What can The Prince offer us?While few current world leaders would want to be referred to as Machiavellian (a term now used to describe ruthless, unscrupulous behavior), many leaders have followed some of the teachings of The Prince, whether knowingly or not. Even our own leaders seem to heed Machiavelli’s advice on promise keeping – the idea that it is acceptable to break a promise if keeping it places one at a disadvantage. Nearly five hundred years after The Prince was published, its approach to individualism still resonates today.

Lord Of The Flies Description Essays - English-language Films, Films

Lord Of The Flies Description Essays - English-language Films, Films Lord Of The Flies Description Setting The story takes place on an island somewhere in the ocean. The island is described by the author as tropical and boat shaped. Along the coast there are sandy beaches followed by a variety of vegetation and creepers. There are also the orchards, which rise up to the treeless and rocky and rugged mountain ridge which extends out of the ocean. Judging from the predicament and dialogue in this story the date in which it takes place is probably the mid 1900's during World War II. The mood created in this story is very complex and rapidly changing. It changes from that of a scary, recessive mood to a light, and cheery one. The way in which the story is written the mood can change literally from chapter to chapter. In the beginning it starts out light and happy and as the novel progresses and the boys start to battle, it starts to become dark and savage. Characters Jack is red-headed and thin he is also introduced as the leader of the boys' choir. To his dismay he loses the election for leader and he becomes the head hunter and is also in charge of maintaining the signal fire. As the story progresses he and his hunters begin to slack-off and abandon their duties in caring for the fire. In the end Jack and his hunters leave Ralph and start their own tribe on the rocky side of the island. Ralph is a tall, blond and is one of the oldest boys on the island. In the beginning of the story he is pictured as the leader of the boys when he blows the conch shell to call the first assembly. During the course of the story he tries to maintain the structure of their civilization and is continually forced to compete with Jack for approval from the boys. Piggy is a fat, asthmatic boy with bad vision. Throughout the story his weaknesses are preyed upon by the other boys much like that of the pigs on the island, thus the name. But despite his appearance, Ralph begins to depend upon Piggy for intellectual and spiritual guidance. Do to his vision, Piggy had unusually thick glasses, which was a benefit to the others on the island, and aided in the lighting of the signal fire and in the roasting of the pigs. Simon was a skinny, silent boy with black hair. He was neither liked nor hated and was abnormally silent throughout the story. The way he is portrayed in the story it is as if he were always contemplating life and his situation on the island. Aside from thinking, Simon also does the necessary chores and obeys all commands from his superiors. Exposition The story starts with a large group of boys crawl on to the beach of a tropical island in the middle of the Pacific Ocean. Their plane was been shot down, and World War II has begun to take place. The boys figure that civilization, as they know it, may no longer exist. Ralph is elected as the leader of the group and Jack decides to be the hunter and provide food for the group. The boys explore the island. They find that it is hard to believe that they're really on their own but their adventuring proves their suspicion. While adventuring Jack's first try at slaying a wild boar fails. Rising Action Another assembly is had and they talk about the need for hunters. One of the smaller boys, says he fears a horrid beast that he saw in the vast jungle. The fear of the beast, of the dark, and of what is unknown about the island begins to affect the boys' ways of thinking. Ralph makes an executive decision and convinces everyone that they need a signal fire to aid in their being rescued. Starting a fire is impossible until they use Piggy's glasses, they are so thick they act as a magnifying glass, igniting the tinder. To Ralph's dismay the boys begin to abandon the fire to play, finding it hard work keeping the fire going. Their fears of the terrifying beast grow worse when the twins, Sam and Eric, see the beast once again. This is

Lizzie Borden essays

Lizzie Borden essays The Lizzie Borden case has mystified and fascinated those interested in crime forover on hundred years. Very few cases in American history have attracted as much attention as the hatchet murders of Andrew J. Borden and his wife, Abby Borden. The bloodiness of the acts in an otherwise respectable late nineteenth century domestic setting is startling. Along with the gruesome nature of the crimes is the unexpected character of the accused, not a hatchet-wielding maniac, but a church-going, Sunday-school-teaching, respectable, spinster-daughter, charged with parricide, the murder of parents, a crime worthy of Classical Greek tragedy. This is a murder case in which the accused is found not guilty for the violent and bloody murders of two people. There were the unusual circumstances considering that it was an era of swift justice, of vast newspaper coverage, evidence that was almost entirely circumstantial, passionately divided public opinion as to the guilt or innocence of the accused, in competent prosecution, and acquittal. Not much is described of Lizzie Andrew Borden's childhood. On March 1, 1851, Emma Lenora Borden was born to Andrew and Sarah Borden, and on July 19, 1860, Lizzie had arrived. While Lizzie was at the young age of two, Sarah died of uterine congestion. In 1865, Andrew Borden wed Abby Durfee-a short, shy, obese woman who had been a spinster until the age of 36. Abby's family were not as well off as the Bordens. Lizzie suffered from psychomotor epilepsy, a strange seizure of the temporal lobe that has one distinct symptom: a "black-out" in which the patients carry out their actions in a dream state, aware of every action without knowing what they are doing. Lizzie Borden seemed to have two entirely different personalities: the good daughter (a member of the Congressional Church, and a brilliant (conversationalist), and the bad daughter (deeply resentful of the patriarchy). These two personalities could be explained by t...

Economic concepts assignment Example | Topics and Well Written Essays - 1000 words

Economic concepts - Assignment Example It is easy to identify, recognize and account for the explicit cost because these costs are documented in the company’s statement. Additionally, physical objects and money based transactions are usually involved in explicit costs (Arnold, 2008). Implicit cost: Implicit costs are also known as implied costs, economic costs, or notational costs. It is directly opposite to the explicit cost. Implicit costs are not actually exposed or accounted as costs. Implicit costs are commonly explained as opportunity costs or the loss of an opportunity in a specified time or condition. Implicit costs are usually related with the intangibles assets and often cannot be traced or documented. These costs include: waste of potential opportunities, wastage of time, and profit wastage. Implicit costs give up the potential paybacks and agreements in a certain transaction of business. Just place, an implicit cost is the loss of a potential profits or assets that did not come about (Gartner, 2009). QU ESTION # 2 U shape cost curve: It is a representation of how the average cost for manufacturing a single unit changes over with the passage of time. The average cost of manufacturing per unit is high in the beginning and decreases as overall production increases. It is because of the fact that the same fixed cost is shared by more units or product. However, if the marginal cost of producing one more unit increases the overall cost again starts to increase because of the diminishing returns. Hence, when it is plotted on a chart, the cost curve seems like the letter U and for this reason is known as U shaped cost curve (Leamer, 2009). Long run cost curve: The long run cost curve is also called cost function in the microeconomic theory. It relates the cost of production to the amount of production and shows the implications of the long run decisions and proceedings on the cost of production of the company. The long run cost curve is the combination of several short run average cost cur ves and is generally U shaped because of the law of diminishing returns (Mankiw, 2009). Average cost curve: The average cost or unit cost is identified by dividing the total cost of production to total number of units produced in the company. An average cost can vary with passage of time with the increase or decrease in the cost of production. The average cost curve is also U shaped because of the fixed cost being shared by increasing products and at the same time marginal cost increasing because of the diminishing returns (Wessels, 2000). QUESTION # 3 Law of diminishing return: This concept of economics stating that, as the quantity of new input (workers, materials, etc.) increases, the marginal product of an added input at same position will be less than the marginal product of the preceding input. For example, consider a plant that uses manual workers to manufacture its items for consumption. If every other factors of production stay constant, at one stage each added worker will give less output then the preceding worker. When this stage is confronted then each extra worker will give less and less returns. If new workers are continuously added, the factory will in the end turn out to be so crowded that added workers in point of fact reduce the competence of the other workers, lessening the production of the plant. Another general example of law of diminishing returns is described as follow: If the population of the city increased then per capita income is decreased. And

Global Warming Essay Example | Topics and Well Written Essays - 500 words - 4

Global Warming - Essay Example The solution is through the concerted efforts of various nations to help each other deal with this environmental trouble in one accord. There are international treaties or agreements that have been made by various nations to help lessen and remedy the damage done by global warming to the environment. Two international and multilateral agreements, the Montreal Protocol of 1987 and Kyoto Protocol of 1998, pay much attention to the damaging effect of world activities to the atmosphere. As cited by Morissette (1989): Its formulation was a response to a growing international consensus on the need to protect stratospheric ozone from depletion by CFCs. The Montreal Protocol is a landmark agreement in that it is the first international treaty for mitigating a global atmospheric problem before serious environmental impacts have been conclusively detected. Upon the agreement of the various countries that participated in the formation and agreement to the Montreal Protocol, the battle against global warming further developed as time went by, and with new concerns. This eventually led to a new agreement known as the Kyoto Protocol.   The  Kyoto Protocol of 1998  is an international treaty deliberated to communicate nations collectively to decrease  global warming,  and to deal with the effects of temperature increases that are inevitable after more than a century of heavy industrialization. Manne and Richels (1998) exposited that this was â€Å"to reduce their aggregate anthropogenic carbon dioxide equivalent emissions by at least 5 percent below 1990 levels in the commitment period 2008 to 2012.† (p.2). The nations that approve of the Kyoto Protocol concur to decrease emissions of six greenhouse gases that increase the problems of global warming. These nations are also permitted to utilize emissions trading to reach their obligations if they maintain or increase their greenhouse gas emissions. All of these activities