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
• Hershey’s decrease by $0.1mn
 Product placement by Hershey
• Hershey’s 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 player’s 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