Week 1

Sequential Games I
Game Setting
 Chocolate Wars
Universal Studio charges $1.0mn
for a product placement
Product placement by Mars
Mars gross profits increase by $0.8mn
Hersheys decrease by $0.1mn
Product placement by Hershey
Hersheys gross profits increase by $1.2mn
Mars decrease by $0.5mn
No product placement: business as usual
 Game Tree (I/II)
First decision starts the game

Every decision point represents a node

From there, the decisions of subsequent

players branch out accordingly
 Game Tree (II/II)
no
Mars product product
placement placement

product no
Hershey status product
quo placement
placement

Mars $ -0.5mn $0
Hershey $ 0.2 mn $0
 Strategy (I/II)
(Extended) Working definition for this course:
A players plan of actions in a game,
given any possible circumstance
 Strategy (II/II)
Example: Price Setting Potential strategies for B

Firm A
high low

Firm B
high low high low
Competitive Strategy
Tobias Kretschmer
Professor of Management, LMU Munich

2013 LMU Munich