Exploring the Duopoly of PLDT and Globe Telecom –

A Game Theory Approach

Lorenzo Raphael M. Deza, Rufino Ser Louis IV G. Moreno,
Dale Gideon C. Ng Tio and Gabriel Alexis P. Rey
Dr. Ederlina Nocon, Research Adviser
De La Salle University – Manila

Abstract: In the Philippines, the two biggest Internet service providers are PLDT and
Globe Telecom. These two companies have control over the market and compete in
an oligopoly, called duopoly. An expected problem arises from this set up where
these two leading Internet service providers fail to initiate a rivalry that would
increase the demand for a better ISP over another. Thus, the Internet service in the
Philippines has become poor when compared to its neighboring countries. This study
seeks to theorize scenarios which aims to determine the possible playoffs of the two
ISPs using game theory. Game theory is a field of study that uses mathematical
models of situations involving two or more players that interact with certain rules and
outcome. The duopoly involving the two ISP is represented in this paper as a two-
person nonzero sum game where the players are (1) PLDT and the Globe and (2) the
people who are represented by the Government. Utilizing a payoff matrix for the
game indicating the resulting payoffs of the two players depending on their choice of
moves. Solutions are then are presented to the game using the concepts of maximin
and Nash equilibrium (pure and mixed) in order to identify the best possible
strategies of all players as they compete against each other.

Key Words: Philippine Telecoms, Duopoly, Game Theory, Nash Equilibrium, Maximin
Theory

1. INTRODUCTION Game theory is the framework used to

The Internet, a global system of
interconnected computer networks with the
purpose of serving information to people
globally, has established its position in society
and daily life through numerous technological
advancements. Eventually, the United Nations
declared the Internet a basic human right
(Kraveta 2011). Thus, Internet Service Providers
(ISPs) were created to monopolize the growing
market around the Internet. Globe and Philippine
Long-Distance Telecommunication (PLDT) – the
two most prominent ISPs in the Philippines, have
been competing in terms of service provided
which has led to a duopoly. However, the
connection provided by these ISPs lacks
competitiveness compared to other countries.
This has led to an impasse in the progression of
better service. The high cost and poor service
lead to the question of how these ISPs remain at
the top (Kim & Salac, 2016).
In present time, this issue is relevant due
to the role the Internet plays in the daily lives of
people. Philippine ISPs, however, continue to
serve slow connection speed despite the high
price. To study the situation, the researchers
opted to analyze the problem using game
theory.
conceive social situations between competing
players (McKinsey, 1952). Past research works
have used this concept to model actual and
theoretical multi-personal economic problems
such as monopoly, oligopoly, etc.
Fan and Zeng (2005), for example,
utilized “Prisoner’s Dilemma,” a type of a non-
cooperative game, to analyze the competition of
Chinese telecommunication companies. They
concluded that competition between promoting
quality of these companies’ respective services
(excluding prices) result to maximum profit. This
is in comparison to when each maximize their
individual gains, negative consequences arise to
the succeeding rival company.
In the study of Ginevicus and Krivka
(2008), they tested the reliability of game theory
models to identify the duopoly market
equilibrium, and compare and evaluate the
result of enterprises in a market. They also used
“Prisoner’s Dilemma,” alongside “Matching
Pennies" in creating game theory models for
different theoretical duopoly situations.
This study was conducted to explore the
duopoly between PLDT and Globe. Furthermore,
it also theorized multiple scenarios which aimed
to determine the possible payoffs the ISPs will
get with respect to the action they have taken.

2. CLASSICAL NON-COOPERATIVE
GAME THEORY
The classical non-cooperative game
theory is a branch in game theory which is used
for practical applications in the discipline of
business, where rival companies compete for
profit in a common population of clients.
Competing companies will then alter strategies
in response to the rival companies’ actions to
attain profit.
2.1 Games in Normal Form
According to McKinsey (1952), the first
step in classifying a game is to distinguish it
according to the number of players. Players are
denoted as n-person so that they fall into n
mutually exclusive sets and classified as
variables having similar interests.
Throughout the discussion, the following
notations will be used:
N= { 1,2, … , n } := set of players or agents
Si := set of actions of Player i
:= Payoff of Player i when Player strategy s1 ϵ S 1 and s2 ϵ S 2.
∏ ( s 1 ,… , sn )
i S j , j=1,2 ,... , n
By a normal form game, we mean a
triple ( N ,( Si )iϵN , Π )where
∏ :S 1 × ...× S n → Rn. When N={1,2}, the
normal form is usually represented by a bimatrix
¿¿
where Si is an m-set of actions for Player i;
S j is an n -set of actions for Player j ;
x ij and y ijare the respective payoffs
of Player i and Player j for the
Example 1: (Prisoner’s Dilemma). This game
involves two players so that
N={Prisoner 1 , Prisoner 2}. The police
separated the two accomplices and both of them
are offered a deal. If Prisoner 1 exposes Prisoner
2 while Prisoner 2 remains silent, Prisoner 1 will
get a shorter time in prison. The same deal goes
for Prisoner 2. However, if they both remain
silent, they each will end up in jail with a
sentence of two years. If they both reveal each
other, they each will get jail time of five years
(Morris, 1994). Each prisoner has a strategy set
Si={ Do Not Confess ,Confess }, i=1,2.
The utility function of the form ∏ : S1 × S2 → R
can be described as follows:
Π (C onfess ,Co nfess)=(−5 ,−5)
Π (Do not confess , Do not confess)=(−2 ,−2)
Π (Confess , Do not confess)=(0 ,−10)
Π (Do not confess , Confess)=(−10,0)
The payoffs here denote the number of
years of imprisonment so that, for example,
Prisoner 1 confess while Prisoner 2 does not
confess, Prisoner 1 goes free, but Prisoner 2 gets
imprisoned for 10 years.
The normal form of a 2-person game is
usually represented by using a payoff matrix.
Player 1’s strategy set is on the left side while
Player 2’s strategy set is at the top. In the payoff
matrix, each cell can be denoted as
( Π ¿ ¿ 1(s1 , s 2), Π 2(s 1 , s 2))¿ for a selected
Table 1: Payoff matrix of Prisoner’s Dilemma
Prisoner 2
Do not
Confess
confess
Do not
(−2 ,−2)(−10,0)
Prisoner 1 confess
Confess (0 ,−10) (−5 ,−5)
2.2. Solution Concepts
A solution is a systematic explanation of
the results that appear from the group of games
(Osborne and Rubinstein, 1994).
2.2.1 Maximin Strategy
Maximin theory states that the maximin
value, the maximum expected value of Player 1,
is equivalent to the minimum value Player 2 can
limit. The maximin is about finding the best
solution out of the numerous negative
possibilities (Morris, 1994). The maximin value
of Player 1 is given by
max i min
v1 = E ∏ ( s1 , s2 ) ]
s1 s2 [
where
v1 is the maximum expected value of
Player 1; and
 E [ ∏ ( s 1 , s 2 ) ] is the expected payoff
function
To find the maximin, the worst-case
scenarios must first be identified. Going back to
Figure 3.1, the maximin for Prisoner 1 and
Prisoner 2 will be determined by their respective
actions. Focusing on Prisoner 1, if he does not
confess, he gets either 2- or 10-years’ worth of
jail time and confessing leads to either 5-years
or none. Thus, 10 and 5 years of jail time were
chosen due to these two being the two worst
outcomes of his actions. The maximin strategy
for Prisoner 1 would be to confess and serve only
5 years.
Table 2: Maximin strategy for Prisoner 1
Prisoner 2
Do not
Confess
confess
Do not
(−2 ,−2)(−10 , 0)
Prisoner 1 confess
Confess (0 ,−10) (−5 ,−5)
max {−10 ,−5 }=−5
Similarly, Prisoner 2 gets either 2 or 10 years
if he does not confess, and 5 years or none if he
does. His/her maximin strategy will also be
Confess.
Putting all the scenarios together, it can be
seen that the worst possible outcomes would be
10 years of jail time for 1 prisoner, or 5 years for
both. Thus, the best solution from the worst
scenarios would be if the two prisoners
confessed since they would both be serving 5
years each instead of the 10 years. This tells us
that the maximin solution of the Prisoner’s
Dilemma game is
(Confess ,Confess) .
Table 3: Maximin strategy for Prisoner 2
Prisoner 2
Do not
Confess
confess
Do not
(−2 ,−2)(−10,0)
Prisoner 1 confess
Confess (0 ,−10) (−5 ,−5)
max {−10 ,−5 }=−5
Table 4: Maximin solution for Prisoner’s Dilemma
Prisoner 2
Do not Confess
confess
Do not
(−2 ,−2)(−10 , 0)
Prisoner 1 confess
Confess (0 ,−10) (−5 ,−5)
2.2.2 Nash Equilibrium
In the Nash Equilibrium, the presence of
external factors does not affect the general
outcome of the game due to its design wherein
the two players’ strategies remain constant
despite having prior knowledge on the opposing
player’s moves (Morris, 1994).
In an n -player game, the n -tuple of
strategiesS¿ =( s¿1 , s ¿2 , … , s ¿j , … , s ¿n ) is said to be
a Nash equilibrium if for all j ∈ \{ 1 ,2 , … , n \} ,
¿ ¿ ¿ ¿ ¿ ¿ ¿
( s1 , s 2 , … , s j , … , s n ) ≤ ( s 1 , s2 , … , s j , … , sn )
(1)
The relation shown in (1) implies that
every player in the game had already
determined the most optimal move they can.
Hence, deviating from this move poses no
benefit to the player. The equilibrium is a state
where all players are satisfied with their
respective best moves.
The Nash equilibrium with property (1) is
usually referred to as pure so that a player P j
takes only one specific action, say s j, from
¿
his/her action set. The existence of such pure
¿
Nash equilibrium S , however, is not guaranteed.
But according to John Nash (1950), if mixed
strategies are allowed, then all games with a
finite number of players participating, wherein
each player can choose from finitely many pure
strategies, has at least one Nash equilibrium. In
the case of a mixed Nash equilibrium, a player’s
best move can be described by
s¿j=( a 1 , a2 , … , am ) (2)
where 0 ≤ at ≤ 1 represents the probability of
player P j using his/her action t∈Sj so that
m
∑ at =1. This indicates that every pure Nash
t =1
equilibrium is also mixed such that player Pj
gets to play exactly one move by setting a t=1
and a s=0 for all s ≠ t .
 Going back to the aforementioned
example, Prisoner’s Dilemma, pure Nash
equilibrium can be used in getting the best
strategy for a prisoner, dependent on the other
prisoner’s action. To get the pure Nash
equilibrium for Prisoner's Dilemma, one must
obtain the optimal strategies of both prisoners.
If Prisoner 1 knows that Prisoner 2 will confess,
then the best move of Prisoner 1 is also to
confess. On the other hand, if Prisoner 1 knows
that Prisoner 2 will not confess, then his best
move would also be to confess.
Table 5: Optimal strategy for Prisoner 1
Prisoner 2
Do not
Confess
confess
Do not
(−2 ,−2)(−10 , 0)
Prisoner 1 confess
Confess (0 ,−10) (−5 ,−5)
The same analysis will be applied to
Prisoner 2. If Prisoner 2 knows that Prisoner 1
will confess, then his/ her best move is also to
confess. Conversely, if Prisoner 2 knows that
Prisoner 1 will not confess, his/her best move is
to confess.
Table 6: Optimal strategy for Prisoner 2
Prisoner 2
Do not
Confess
confess
Do not
(−2 ,−2)(−10 , 0)
Prisoner 1 confess
Confess (0 ,−10) (−5 ,−5)
Now, to determine if the Nash
equilibrium is existing, both Prisoners must use
their optimal strategies. If both optimal
strategies fall in one cell, then that would be the
pure Nash equilibrium of the game. In this case,
both of the prisoners' optimal strategy is to
confess. Thus, the Nash equilibrium of the game
is
(Confess ,Confess ).
Example 2: (Battle of the Buddies). This game
involves two friends named Norm and Cliff, so
that N={N ,C }. Each of the two have different
taste in evening entertainment; Norm has a
preference for watching wrestling (denoted by
W ), while Cliff prefers watching roller derby
(denoted by R ). However, they both dislike
going to their choice to entertainment alone,
instead they would rather want to go the other’s
choice of entertainment. In a “happiness rating”,
both will have a have 0 if they go to their
preferred event alone, 1 if they go to their
friend’s choice of entertainment with their friend,
and 5 if they go to their chosen entertainment
with their friend (Morris, 1994). Both have a
strategy set
Si={W , R }, i=N ,C .
The utility function of the form Π : S N × SC →R
can be described as a payoff matrix.
Table 8: Payoff matrix of the Battle of the
Buddies
Cliff
W R
W (5 , 1) (0 , 0)
Norm
R (0,0) (1 , 5)
There are instances wherein the pure
Nash Equilibrium does not exist, such as in the
Battle of the Buddies. However, this does not
mean that the Nash equilibrium of the game
does not exist. Instead of finding only one move
for each of Norm and Cliff, a mixed strategy is
to be identified, say ⃗ p= ( p , 1− p ) , where
0 ≤ p ≤ 1. This describes a manner of playing the
game for a particular player so that the
probability of him/her playing his first action is
p and since there are only two actions s/he can
do, then the probability of him/her choosing the
second action is 1− p . Additionally, in an N -
person game, because of the mixed strategies

Table 7: Nash equilibrium of Prisoner’s Dilemma

⃗p1 , … , ⃗p N ,the expected payoff of Player Pi can
Prisoner 2 be computed by
Do not
Confess Π i (⃗p1 , … , ⃗p N )=∑ ( p 1 ( x1 )× … ׿ p N (x N )) Π i (x
(3 1 , … , x N ),¿
confess )
Do not i=1 , 2, 3 , … , N
(−2 ,−2)(−10 , 0)
Prisoner 1 confess In the Battle of Buddies, the mixed
Confess (0 ,−10) (−5 ,−5) strategies of Norm and Cliff are
 5
N: S N = ( x , 1−x ) x < , then Cliff should always play R ( y=0 ¿ in
6
C: SC = ( y , 1− y ) order to maximize his own expected payoff; if
5
where
x= , then Cliff can either choose W or R to
6
x is the probability that Norm uses the 5
move W , 0 ≤ x ≤1 ; and maximize his payoff; if x> , then Cliff should
6
y is the probability that Cliff uses the always choose W ( y=1) to maximize his
move W , 0 ≤ y ≤ 1;
payoff.
As shown in Figure 1, equations (4) and
Moreover, the expected payoff of Norm can be (5) can be plotted in a single graph, where (4) is
expressed as represented by the blue line, while (5) is the
pink line. The three intersections in the graph
∏ ( x , y )=5 xy + ( 1−x ) ( 1− y )=6 xy −x− y +1 implies that there are three Nash equilibria,
N which are

while Cliff’s expected payoff is  Pure equilibria: (0,0 ¿ ,and (1,1 ¿

∏
c
( x , y )=xy +5 ( 1−x ) ( 1− y )=6 xy −5 x −5 y+5.  Mixed equilibrium:
( 56 , 16 )
To find the Nash equilibrium of the Note that the pure equilibria correspond to the
game, the payoff functions of Norm and Cliff pairs of moves
should be rewritten as
(0,0):(Roller derby , Roller derby ); and
∏ ( x , y )=( 6 y −1 ) x− y +1
N
(4) (1,1):(Wrestling , Wrestling).
Normally, Norm would prefer (1,1), while Cliff
and prefers (0,0); since at their preferred
equilibrium, each of them have a happiness
∏ ( x , y )=( 6 x−5 ) y−5 x +5.
C
(5)
rating of 5. If the mixed equilibrium
( 56 , 16 ) is

These two equations will be examined to followed, then both will have a happiness rating
determine the best possible moves to be used 5
by the two players. Naturally, both players of .
would want to maximize their own expected 6
payoffs.
We can observe from (4) that the
y
expected payoff of Norm is maximized
1 1
depending on the value of y. If y< , then
6
Norm should always play R ( x=0 ) to maximize
1
his payoff; if y= , then Norm can play either
6
of his own to actions to maximize his payoff; Nash Equilibrium
1 Points
lastly, if y > , then Norm should always play
6
W ( x =1) to maximize his payoff.
Same analysis will be applied to (5). In 1/6

this equation, we can see that ∏ (x, y) is

C
maximized depending on the value of x. If
5/6 1 x
Figure 1: Equilibrium pairs for the Battle of the
Buddies
3. RESULTS AND DISCUSSION
3.1. The Game Model
The model takes PLDT and Globe
Telecom as one player represented by the
symbol PG . It competes against the second
player, the government (denoted by G ),
representing the Filipino people so that the
player set is N={PG , G }. PLDT and Globe
Telecom may either compete or cooperate with
one another while the Government may do
nothing or may offer a third alternative telecom.
To gain better profit, the two telecoms may
choose to cooperate with one another if the
Government does nothing. Consequently, the
Government may introduce a new telecom to
break the duopoly of PLDT and Globe. Thus,
using the notations Cp and Cm to denote
cooperate and compete respectively as moves
for Player PG, and D and I to mean do nothing
and introduce a new telecom as moves for G, the
action sets for the game are
S PG= {Cooperate ,Compete },
SG ={ Donothing , Introduce new telecom }.
The utility function ∏ :S PG × SG → R
described in the following payoff matrix:
Table 9: Payoff matrix of the game model
G compete as this leads to the best payoff from
D I
Cp (a , – b) ( – c , d )
PG
Cm (0 , 0) (e , f )
The values represented in the utility
function and payoff matrix are explained below:
(i) PLDT and Globe will gain a profit of a
if they cooperate with each other and
the Government does nothing.
(ii) The people will have a loss of −b if
PLDT and Globe cooperate, and the
government does nothing.
(iii)PLDT and Globe will have a loss of −c
if they cooperate with one another
and the government introduces a new
telecom.
(iv)The people will have a gain of d if
PLDT and Globe cooperate with one
another and the Government
introduces a new telecom.
(v) The people, PLDT and Globe will not
gain anything if they both telecoms
compete, and the Government will do
nothing.
(vi)PLDT and Globe will gain a profit of e
if they both compete, and the
Government introduces a new
telecom.
(vii) The people will have a gain of f if
PLDT and Globe compete, and the
Government introduces a new
telecom.
(viii) The values a , b , c , d , e ,and f
are nonnegative, with e <a and f <d .
3.2. Game Solutions
This subsection discusses solutions to
the game model using the Maximin strategy and
Nash equilibrium (pure and mixed) to identify
the best possible moves to be used by PG and
G.
3.2.1. Maximin Strategy
The maximin strategy is a pessimistic
approach to solving a game. To get the maximin
strategy for each player, one must get the best
solution out of the numerous negative
possibilities.
Focusing on PLDT and Globe, if they
cooperate with one another, they will either get
a profit of a or −c , and if they compete with one
is
another, they either get a profit of e or no profit.
Thus, 0 and −c will be chosen since these are
the worst possible payoffs of their moves. The
maximin strategy of PLDT and Globe is to
the worst possible outcomes.
Table 10: Maximin strategy of Player PG
G
D I
Cp (a , – b) ( – c , d )
PG
Cm (0 , 0) (e , f )
max {0 ,−c }=0
Now focusing on the government, if they
did nothing, the people would have a loss of −b
or no gain. However, if they introduce an
alternative telecom, then the people will have a
gain of d or f . Thus, f and −b will be chosen
since these are the worst possible payoffs of
their moves. The maximin strategy of the
Government is to introduce a new telecom as
this has the best payoff of the worst outcomes.
Table 11: Maximin strategy of Player G Cp (a , – b) ( – c , d )
G PG
Cm (0 , 0) (e , f )
D I
Cp To determine if the Pure Nash
(a , – b) ( – c , d )
PG Equilibrium of the game exists, both players
Cm (0 , 0) (e , f ) must use their optimal strategies. Therefore, the
Nash Equilibrium of the PLDT-Globe and People-
max {−b , f }=f Government game is

The best strategies from the worst ( Compete , Introduce new telecom ) .
outcomes would be to compete for PLDT and
Globe and introduce a new telecom for the Table 15: Optimal strategies for both players
Government. The maximin solution of the game
is
G
D I
(Compete , Introducenew telecom). Cp (a , – b) ( – c , d )
PG
Cm (0 , 0) (e , f )
Table 12: Maximin strategies of PG and G
G 3.2.2. Mixed Strategy Nash Equilibrium
D I In this discussion, the researchers
consider finding mixed strategy Nash equilibria
Cp (a , – b) ( – c , d ) for the two-person zero-sum game as defined in
PG
Cm (0 , 0) (e , f ) 3.1. For the formulated game model, these
mixed strategies are defined as follows:
3.2.2. Pure Strategy Nash Equilibrium
The Pure Strategy Nash Equilibrium of PG : S PG=( x ,1−x )
the PLDT-Globe and People-Government game
can be determined by getting the optimal
G: SG =( y ,1− y )
strategies of both PLDT and Globe, and the where
Government. x is the probability that Player PG uses
If PLDT and Globe know that the the move Cp , 0≤ x ≤ 1; and
Government will introduce an alternative
telecom, then their best move is to compete y is the probability that Player G uses
(since e >−c ). Consequently, if PLDT and Globe the move D , 0 ≤ y ≤1 .
know that the Government will do nothing, then
their best move is to cooperate with one another Due to the mixed strategies x and y by players
(since a> 0 ¿. PG and G , respectively, the expected payoff of
PG is
Table 13. Optimal strategy for PLDT and Globe
G ( x , y )=axy−cx ( 1− y ) +e ( 1−x )( 1− y ) .
D I
∏
PG
Cp (a , – b) ( – c , d )
PG The expected payoff of G, on the other hand,
Cm (0 , 0) (e , f ) can be expressed as
If the Government knows that PLDT and
Globe will compete with one another, then its ∏ ( x , y )=−bxy+ dx ( 1− y )+ f ( 1−x )( 1− y ) .
best possible move is to introduce a new G
telecom to the public (since f >0 ¿. If the
Consequently, the expected payoff of the two
Government, on the other hand, knows that
players can be further simplified into
PLDT and Globe will cooperate with one another,
then its best possible move is also to introduce a
new telecom (since d >−b ¿ . ∏ ( x , y )=axy+ cxy +exy +ex −cx−ey −e (6)
PG

Table 14. Optimal Strategy for the Government

and
G
D I
∏ ( x , y )=fxy−dxy−bxy + dx−fx−fy + f .. (7) response to any possible move of Player G is
G represented in the Figure 2.

To find the mixed strategy Nash

equilibrium of the game model, equations (6) y
and (7) should be rewritten as
1

∏ ( x , y )=e ( 1− y ) + [ ( a+ c+ e ) y−( c +e ) ] x x(8)

PG

and
yo
∏ ( x , y )=f + ( d−f ) x+[ ( f −b−d ) x−f ] y
G
(9)

Equations (8) and (9) were analyzed to

determine the best response of each player
given a known mixed strategy of his/her
opponent. Clearly, the goal of each player is to
maximize his/her own expected payoff. 0

For PLDT and Globe, ∏ ( x , y )is

PG
5/6 1 x
maximized depending on the value of y.
Suppose y assumes the value Figure 2: Best response mixed strategies of
Player PG
c +e
y 0=
a+ c+ e For the Government, ∏ ( x , y )is
G
so that this gives the probability that Player G maximized depending on the value of x. The
will use the move D . Then the expected payoff second summand [ ( f −b−d ) x−f ] y of equation
of PG is reduced to the constant (4) will be examined. Since 0 ≤ x ≤ 1, the
coefficient ( f −b−d ) x−f of y is always
∏ ( x , y 0 ) =e ( 1− y 0 ), negative so that the payoff of G can be
PG
expressed as
and therefore, PG can use any mixed strategy
⃗x =( x ,1−x ) for 0 ≤ x ≤ 1. This implies that ∏ ( x , y )=f + ( d−f ) x−ky (with k > 0).
G
either of the two actions Cmor Cp yields the (11)
same payoff for PG . Now, let equation (3) be
written as: The third summand of (6) takes the form −ky
and hence, the best response for Player G is to
∏ ( x , y )=e ( 1− y ) + ( a+ c+ e ) ( y− y 0 ) x . always set y=0, that is, choose the pure
PG
(10) strategy I . As shown below, Figure 3 represents
the best response of Player G .
The first case is considered in whichy < y 0. This
equation indicates that the factor y− y 0 on the
second summand is negative and thus, PG must
choose to set x=0 in order to maximize his/her
payoff leading into the conclusion that his best
move is to take the action Cm. On the other
hand, when y > y 0, then Player PG must set
x=1 and playing Cp maximizes its playoff. The
analysis of the best moves for Player PG in

y
1
0
1 x
Figure 3: Best response function of PlayerG
The Mixed Strategy Nash Equilibrium of
the game can be determined by plotting both
the best response function of PG and G in one
graph. The point of intersection of the two
graphs associated with the best moves of the
two players identify the Nash equilibrium of the
game. As shown in Figure 4, there is only one
intersection; hence, this suggests that the game
only has one equilibrium pair at (0,0). Note that
the pure equilibrium corresponds to the following
pairs of moves
(0 , 0):(Compete , Introduce new telecom).
The mixed strategy of the game model
indicates that Player PG should play Cp with a
probability of 0, while play Cm with a probability
of 1. Player G , on the other hand, should play D
with a probability of 0, while play I with a
probability of 1. This implies that the two leading
ISPs in the country, PLDT and Globe, should
always compete, while the government should
introduce a third alternative telecom. Playing
this strategy, PLDT and Globe will have a
theoretical expected payoff of e , while the
Government will have a theoretical expected
payoff of f.
y
1
yo
Nash Equilibrium Point
0
5/6 1 x
Figure 4: Best Responses
4. CONCLUSIONS
This study constructed a game model
describing the duopoly involving PLDT and Globe
and descriptions of their actions as well as
possible responses of the people expressed
through government power. The game was
analyzed by presenting two solutions – maximin
solution and Nash equilibrium (pure and mixed).
For the maximin solution and pure Nash
equilibrium, the researchers found that the pair
of strategies
( Compete , Introduce new telecom )
is the most compromising move for PLDT and
Globe, and the government, respectively. In the
mixed Nash equilibrium, on the other hand, two
equations,
∏ ( x , y )=e ( 1− y ) + [ ( a+ c+ e ) y−( c +e ) ] x x
PG
and
∏ ( x , y )=f + ( d−f ) x+[ ( f −b−d ) x−f ] y
G
were analyzed by the researchers to determine
the best response of PLDT and Globe, and the
government given a known mixed strategy by
their opponent. This resulted to a pure
equilibrium (0,0), which corresponds to the pair
of moves
( 0,0 ) : ( Compete , Introduce new telecom ) .
The solution to this strategy is the same as the
solution to maximin and pure Nash Equilibrium.
These solutions suggest that PLDT and Globe
should always compete to achieve their
maximum payoff. Conversely, the government
should introduce a new telecom to the market to
maximize the expected payoff of its citizen.
Though these results might not have a
seemingly logical and practical application in the
situation of resolving the conflict of the game,
these values actually tell about making an action
to be chosen at a given percentage of the time.
The analyses obtained give light to identifying
the best move for the people who are
represented by the government.
For further related studies, the
researchers suggest that the study consider
more factors, such as the inclusion of minor ISPs,
etc. The use of evolutionary game theory as a
means of determining the optimal moves to be
made by different parties is also to be
considered. Lastly, the researchers recommend
gathering data from PLDT and Globe to simulate
the actual duopoly and determine its effect on
the people.
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Nash, J. F. (1950). Equilibrium points in n-person
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hengfan05.pdf?
fbclid=IwAR0QOm8y3GK3ipzGO0hFJDPLR1m
nxFhQw0PBcL4UmU3OdBPHMxf2azWWR

5. ACKNOWLEDGMENTS
First and foremost, the researchers
would like to thank God Almighty for the
blessings and guidance he had imparted
throughout the entire duration of the research
project.
The researchers would also like to give
their utmost respect to their thesis adviser, Dr.
Ederlina Nocon, who has continually given her
time and effort in mentoring the researchers, as
well giving them suggestions and comments,
which helped in accomplishing their tasks
efficiently.
Furthermore, the researchers would like
to extend their gratitude to De La Salle
University, Ms. Courtney Ngo and Mr. Angelo
Alberto, for assisting them during their journey
of research.
Lastly, the researchers respectfully give
their thanks to their respective parents and
friends for their unwavering support which
helped the researchers get through difficult
times.

6. REFERENCES
Ginevičius, R., & Krivka, A. (2008). Application of
game theory for duopoly market analysis.
Journal of Business Economics and