Critically examine how the economics of non-cooperative game theory complements the

strategy choice of a company in a competitive game, thus avoiding strategic missteps. It is

imperative that you use a case study and Workshop case research in presenting your
arguments.
Introduction

The companies make different strategies to get a competitive advantage in the market. In this
regard, the management proposes different strategies and tactics to reach the desired goal. In this
case, it is found that the objective of the origination also plays an important role as come
companies tend to make more profits while others look for the increasing market share through
volume sales at lower prices. In this regard, the macroeconomic factors of the companies is quite
important to consider while making these decisions. However, the non-cooperative game theories
are used to make the competitive strategies that consider the microeconomic factors to achieve
the set goals. In this essay, the researcher has argued tha how the economics of non-cooperative
game theory complements the organization's h strategy choice (Zhang and Liu, 2013). In this
regard, the understanding of the non-cooperative theory is required to connect with the economic
factors to design the strategies for the companies. Moreover, Apple's case study is also
incorporated into the discussion for a better understanding of the non-cooperative game theory
and its impact on strategic decisions making.

In-game theory, the non-cooperative game is one of the games that include the compaction
between different individual players. It is considered as the opposition of the cooperative game
theory. In a non-cooperative game, the alliances can operate only if there is the self-environment
through credible sources. Non-cooperative games are generally analysing how the individual
player’s product the strategies and payoffs to find the Nash equilibria. Nash equilibria is the
concept of mathematics that supports the concepts of economics as well (Madani and Lund,
2011). The Nash equilibria concept relates to the point in which the strategy reaches its optimal
potential, and there is no incentive from deviating the initial strategy of the origination or game.
There are no incremental benefits for the players. If the strategy is changed, it assumes that the
players are making constant with their strategies. One of the fundamental characteristics of a
non-cooperative game is that it is impossible to sign agreements or contracts that can be
challenged in the court or informing of any other authority (Ye, Hu & Lewis, 2018). In this
context, the cooperation among the players is exercised that finds the equilibrium or solution to
the proposal for the players' better interests. In another view, the non-cooperative game theory
has dominated the modelling landscape in recent years in chit the technicians are employed. The
outcomes of the modelling are referred to as the aggregated individual decision under the
outcomes are stable over time. Moreover, Apple's case has been discussed from the point of non-
cooperative game theory in which Huawei has emerged as the major rival. Thus, it includes
different decisive concerns for the companies to proceed further with the strategy in the market.
In this regard, there are different concerns over different decision like strategic entry in the
market. it is required to discuss whether company should be focusing on its own operations or
working to block the entrance of new companies in the market.

Strategic Entry

The researchers have considered different forms of entrance strategies that are considered to be
considered while making a decision. The cost of entrance is required to be analysed before the
entrance. In this case, the companies must have the incumbent response before making the
decisions as the market rivals also play an important role in decision making. In Apple's case, it
is assumed that there are only two companies show in the market while Huawei is the newer
entrant and Apple already exists in the market. In the mobile phone market, Huawei is entering
the same market as Apple is operating with some diversification in the features (Samuelson,
2016). However, the product falls in the same category. The game theory depicts tha Apple
considered more self-evaluation rather than blocking the ways for the other companies as Apple
considered itself to be working with the different software and service. The company already
took the copyrights to avoid the copy of the iOS system while other companies were already
operating in the mobile phones category, a there was room for more to enter (Agbo, Rousselière
& Salanié, 2015). If Huawei did not want to enter after analysing the whole situation, then there
would be all profits for Apple for the targeted segments of Huawei, but Huawei decided to enter
the market. Apple wanted to reach the Nash equilibrium by becoming the Marris type of product.
The Marris type focuses on organic growth through e product diversification.

Apple has spent more on R&D from 2014-2019, which results in more sales, which means that
the research and development leads to better product diversification. In the future, Apple can
consider CL type and move to India for production as labour cost is 48% lower than China to
have better income out of the company's sales. The entrance of Huawei to the market raised more
concerns like reaching the Nash equilibrium. Apple and Huawei are currently working on the
High innovation strategy to bring more innovation to the products and services to become the
Marris type and reach better economies. Like, Figure 1 shows tha the high innovation strategies
from both companies can reach the 50,50 situation or market share. However, major criticism
does not see outcomes as many external forces can impact the companies' strategy. Though both
companies' internal strategy is to have high innovation and external forces like political
situations do not let the companies stick to the policies. For example, the Sino-US trade war
impacts the decisions main in which, even the innovation cannot lead the company to increase
market share because the case of innovation like introducing 5th generation technology, has led
countries into a trade war (Ouenniche, Boukouras & Rajabi, 2016). Thus, it is deduced from the
findings tha the external actors are neglected during the non-cooperative age that becomes the
barrier to implementation on the real-life companies as the strategies need to be implemented
rather than making them on paper only.

Figure 1

Moreover, product launch is another decision that has an influence on the overall performance of
the organizations. Thus non-cooperative game theory is discussed in the context of product
launching by the selected companies.

Product Launch

The product launch is one of the major decisions that companies take to expand the market share
and sales of the newer products on newer threads. However, the decisions of launching a product
are quite critical because timing, demands, and market conditions can affect the companies
decant to launch a certain product. The companies need to decide tha thither the product is
required to be launched on the go in which schedule is not given to the market, and there is
operational flexibility to launch the product at the time of comfort for the organizations. It is
further argued that the launch of a product is based on the investment in the R&D and the
competitors in the market because the rivals' strategies need to be analysed (Baniak & Dubina,
2012). As rivals can rebuttal, the product launch can be led to swallowing the company's market
share. It is witnessed quite common that different companies launch the product simultaneously,
and it has been questioned how game theory can help make such a decision. The scholars have
argued that the companies have three different choices, including prep on the launch, postpone
the launch or schedule the launch. In a cooperative market, the companies negotiate and decide
not to interfere in the launches so the other companies. However, the current markets are non-
cooperative (Lobel et al., 2016). Suppose the exhale of the mobile phone market is analysed. In
that case, several companies are launching products from time to time, and there is not the
possibility of getting into a cooperative agreement. Thus, the non-cooperative game theory helps
decide whether the launch can lead to market efficiency and increased sales.

The game theory helps the companies decide the timing go the releases while considering the
factors like consumer demands and predicting other companies' release dates. Though, it has
been discussed tha the first movers can grasp the most share in the market due to the first
launching. However, it is also argued by the scholars tha the game theory is based on predictions
and assumptions. In real life, companies copy the structures, market campaigns, and target
markets of the first movers, and the benefits can be taken in limited resources. The game theory
represents that the first movers align with the competitor’s analysis is required ( Tadelis, 2013).
For example, the game theory suggests the launch of the iPhone should be in 2007 and that
happened at the same time. Moreover, the time frame of the launch of new product with
enhanced technology such as 3g happened on the time scheduled with the game theory. In this
regard, the game theory suggested the iPhone to be the first mover to capture the market share,
which turned out to a success for the company.

The game theory suggests tha the iPhone needs to have a high innovation strategy or there will
be minima of -40, which shows the company can have losses. Thrust the high innovation strategy
can maximize the gains or minimize the losses for the organization. As shown in figure 2, with
the help of game theory that there are mime gains for the company while choosing a high
innovation strategy.

Figure 2

The game theory suggests tha there is a high need to address the customer needs over time tor
sometimes companies create the needs. For example, suppose a customer is using iPhone 6 for
few years and Apple is not launching a newer product (Narahari, 2014). In that case, there is a
possibility that the potential customers may go for the competitors to fulfil their needs of newer
products. Thus, game theory suggests the companies like Apple deliberately create the needs. In
this regard, Apple used the belt strategy to go for the new product launch and deliberately slowed
down the iPhone 6 and iPhone 7 in 2017. The customers got frustrated and threw away the older
phones to buy new iPhone with better speed and features. Meanwhile, Apple launched its newer
product, and Apple has been fined for $113 million recently because of the immoral activity.
However, the non-cooperative game still suggests that if the company needs to stay in the
market, then the product launch timing is crucial (Romm, 2020). This is why Huawei and Apple
both have been launching products and services each year depicted in the figure 3.
 Figure 3

Challenges of technology

Technology is the major competitive advantage for the companies these days as the companies
are trying to use disruptive technology to better impact the sales and production operations of the
organization's products. It has been found that the mobile phone industry is one of the major
industries that has been affected by the technology, like the use of different technological tools
and processes led companies to create the market share in targeted markets (Trestian, Ormond &
Muntean, 2012). The non-cooperative game theory suggests companies need to be high
innovating companies in the ethnological field because the Marris type is one of the major tools
to compete in the non-cooperative market. The companies depend on product diversification and
price competition over time. In Apple's case, the company has been launching new products and
services to differentiate from the products available in the market. It has been found that the past
2017 (Fadlullah et al., 2011). The company has witnessed more profits in the services division
than the product division. That is the product and services sales are divided into two different
categories. On the other hand, CL type is also recommending to the company.

The criticism from the scholars have been found on the non-cooperative game theory that there is
a problem in selecting one strategy that can lead to problematic decision-making. For example,
the game theory suggests tha Apple should move from Marris type to CL type company in which
the product should be started in the countries like India where labour cost is already 46% lower
than China. On the other hand, the Indian infrastructure may not support the theological need, so
Apple, at the extent Chinese Infrastructure is providing (Yu, Tseng & Langari, 2018). It has been
discussed tha there is one major shortcoming of the game theory that it relies on assumptions and
does not consider the external factors. The political concerns like the Sino-US trade war are
among the major factors that may lead Apple to go for CL type. The taxes are increasing in both
countries; products that require Apple to find a new destination o installed all the technology and
start operations. Thus, it is one of the major technological challenges that can be resolved by
mixing Marris type with CL type in which Apple is differentiating from the products in the
market while opting the lower labour cost for the production of Apple products.

Pricing

The pricing is one of the major variables for the companies to make decisions. The Cournot has
given discussed that the companies compete on quantity to increase the mass production that
leads to the economy so scale. Cournot’s findings can be applied to industrial products while it
might not apply to technological products. Because pricing is one of the major concerns for the
companies and customers and Bertrand, the variable is a price to make the decisions (Tremblay
and Tremblay, 2011). Bertrand’s model suggests tha the equilibrium can be archived when the
revenue gets equal to the marginal cost, and it becomes the major deciding factors for tithe
company and the customers. The non-cooperative theory suggests that the Nash equilibrium
should be achieved rather than considering Bertrand’s equilibrium. Bertrand’s will take
companies like Apple and Huawei into a price war in which botch dampens can be reducing the
price until it gets equal to marginal cost where the organization can generate no loss or profits
(Haraguchi & Matsumuram 2016). In this case, if the companies drop prices lower than the
marginal cost, then there will be a loss to both companies.

So, it has been argued that the Nash equilibrium should be followed in which there is not
potential gain for moving from the initial strategy. Thus, Apple should be sticking to the Marris
type. Higher sales and profits can be achieved through different product tuition and a high
innovation strategy by the organization (Mukherjee, Broll & Mukherjee, 2012). Thus, the
companies compete more in product diversification and launching timings rather than
considering prices only. Apple products are relatively highly-priced than Huawei, still, the
product launch and services provided by the company are causing protest over the years. Though
it has also been withered that there is a decline in Apple's sales of products in 2019, which can be
due to the higher prices and more availability of the products from Apple’s competitors in the
market.

Conclusion

The whole discussion shows that there are different factors of economics and non-cooperative
age theory that affect the companies' decisions. The non-cooperative game theory got more
important these days because the markets are non-cooperative. The competition is high, and
companies tend to make the strategies beneficial for the companies in the longer run. It has been
found with the application of game theory on Apple and Huawei that the companies hold be
sticking to Marris type while including toward the CL type to some extent. It will keep the
strategy of product diversification along with shifting towards the low labour markets. In this
case, the political influence is discussable because there can be a huge impact ton the decisions
making which may not be identified by the game theory. The non-cooperative game theory has a
major focus on the competitors and their choices rather than the external factors. So, the game
theory helps in decisions making while it requires the incorporation of the external actors. The
non-cooperative theory is flourishing as the companies are also using the tool to make decisions.
In this raged, it is also found that the companies should be aiming for the Nash equilibrium to
make the best strategy rather than getting into price wars as it will not help any of the
competitors operating in the market. Rather it will reduce the margins by getting closer to
marginal cost.
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