Week 1

Simultaneous Games I
Game Setting

5mn) • No effect on total market size and sales • Increase of company‘s market share to 80% • But only if the other does not advertise .Toothpaste Wars    Sensodyne and Colgate both sell toothpaste They share the market equally (total sales £10mn) Each company considers launching an advertising campaign (costs £2.

Game Setting (I/II)  Players • Sensodyne • Colgate Actions • Advertise • Do not advertise Rules • Both have to decide simultaneously   .

5mn = • Only one advertises o Advertiser: £8mn .£2.Game Setting (II/II)  Payoffs • Both do not advertise: Each £5mn • Both advetise: Each £5mn .5mn = o Non-Advertiser: £2mn .£2.

Matrix Form Colgate Advertise Do not advertise Sensodyne Advertise £2.0mn Do not advertise .5mn £5.5mn £2.5mn / £2.0mn / £5.0mn / £5.0mn £5.5mn / £2.

but very useful later on in more complex situations .Strategy   Working definition for this course: A player‘s plan of actions in a game (here: Ad/no Ad) This sounds trivial for now.

Competitive Strategy Tobias Kretschmer Professor of Management. LMU Munich © 2013 LMU Munich .

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