Week 6 Discussion – Game Theory: Sequential Games are Played in Business All the Time

Preparation

The following video is about many of Cournot’s contributions. Pay attention to the demonstration here of the Cournot Duopoly as a Nash equilibrium. The video nicely illustrates this complicated model with pictures—no math! This is exactly the game we play in this week’s discussion.

• CournotLinks to an external site..

Your instructor may also post additional resources to help further explain concepts related to this week’s discussion.

Context

In our Managerial Economics textbook, 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.”

Post a Response

For your discussion post, use Figure 15-1 from the textbook as your starting point to address the following:

1. Play and analyze the game. Can, and how does, the entrant succeed? Is the incumbent ever in control of this game? What is the Nash equilibrium?
   • You may wish to review the old game known as Duopoly, as well as Antoine-Augustin Cournot, to help inform your post.