Analyzing Payoff Table

1. Payoff Table is a tool used to describe the players, their strategies, and their payoffs in a
competitive situation.
2. para mas maintindihan natin yung pay off table. Let us analyze first the Jockeying in the TV
rating Game
3. Makikita natin dito sa table na meron tayong 2 players, which is the 2 major television
network, Yung NBC at CBS.
4. Yung profits ng dalawang major television networks depend on the ratings of their prime-time
programs.
5. Magfofocus tayo sa kanilang programming decisions for the 8 PM and 9PM slots.
6. the networks must decide when to schedule their hit show (at 8 PM or 9 PM)
7. Makikita natin dito yung NBC's is actions along the rows (alternative action is listed along the
raws) and CBS's actions along the columns (alternativ action listed along the columns).
8. First number, top of parenthesis is the Total number of viewers in millions, while inside the
parenthesis is the total number ng viewer ng 8 pm + 9PM.
9. Lets take a look in the perspective ng dalawang networks.
10. If yung dalawang network is parehas na inischedule yung hit show nila ng 8PM, yung payoff will
be 36 million in NBC and 33 million sa CBS. Mas less ng 3 million yung CBS.
11. Since less ng 3M yung CBS compare sa NBC, so pwedeng magpalit ng strategy yung CBS at
ilagay yung hitshow niya sa 9PM slot.
12. Pero makikita natin sa Table na kapag inischedule ng CBS yung hitshow niya ng 9PM tapos si
NBC is nag stay lang sa 8 PM yung outcome is mas mataas pa rin yung payoff ng NBC kesa sa
CBS.
13. NBC has 39 million while 28 million naman sa CBS. So kung titignan mas nag decrease pa yung
pay off niya compare dun sa kapag mag stay nalang siya sa 8 PM.
14. So kung titignan natin yung dominant strategy ng both competitors, yung dominant strategy
nila is schedule nila yung hitshow nila 8PM.
15. What is dominant strategy?
16. Dominant Strategy is the best response to any strategy that the other player might pick.
17. So ibig sabihin kung ano yung stategy na gagamitin ng kalaban mo meron pang counter dun sa
strategy na yun, regardless na yung strategy mo is losing.
18. Kagaya kay CBS na mas less yung payoff compare kay NBC atleast na minimize niya yung payoff
ng NBC and at the same time na maximize niya yung sarili niyang payoff.
19. Conclude that the dominant strategy for both NBC and CBS is to schedule their hit show at 8
PM, resulting in audience shares of 36 million and 33 million, respectively.
 Equilibrium Strategy

1. Or tinatawag ding Nash Equilibrium - In settings where competitors choose actions

independently of one another (and so cannot collude), each player should use an equilibrium
strategy, one that maximizes each player’s expected payoff against the strategy chosen by the
other.
2. It is a concept used in game theory para idescribe yung mga situation kung saan walang player
ang magbebenefit in changing their strategy kapag yung ibang players nag stick pa rin sa
equilibrium strategies nila.
3. Evident ito sa next example natin na, Market-Share Competition. So dito, mas maiintindihan
natin kung ano ba talaga yung Nash Equibrium.
4. Two firms are competing for a fixed market share. Each firm can adopt one of three marketing
strategies in an attempt to win customers from the other.
5. The advertising competition is a zero-sum game, meaning that one firm's gain is the other
firm's loss. Nasabi na to kanina, kung magkano yung kita mo siya yung lugi ng kalaban mo.
6. Firm 2 is the row player while Firm 1 is the column player.
7. So, bat iisa lang yung pay off dito compare dun sa nakaraang example ng pay off table kung
saan dalawa yung payoffs?
8. It is a zero sum game, kaya kung ano gain mo is siya din yung loss ng kalaban mo.
9. Each firm may tig tatlong strategy, Firm 1 (C1, C2 and C3) and Firm 2 (R1, R2 and R3)
10. Dito makikita natin sa persfective ng Firm 2, kapag positive number ibig sabihin ito yung gain ng
Firm 2 and lost ng firm 1, kapag negative number naman ibig sabihin, ito yung gain ng firm 1
and lost ng firm 2.
11. Medyo magulo lang, pero tignan natin.
12. Una tignan muna natin yung sa gagamiting strategy ng firm 2 against sa gagamitin ng firm 1.
13. First, kapag ginamit ng Firm 1 yung strategy niya na C1, yung best strategy ng firm 2 is gamitin
yung R3, kase kung titignan mag ge gain siya ng 7% kung ito yung gagamitin niya laban sa C1 ng
firm 1.
14. So mapapansin natin, Naka encircle yung best response ng Firm 2 dun sa mga strategy na
gagamitin ng firm 1.
15. Next, kapag ginamit ng firm 1 yung C2, yung best strategy ng firm 2 is gamitin yung R2, kase
mag ge gain siya ng 2%.
16. Kapag ginamit naman ng firm 1 yung C3, yung best strategy niya is Gamitin yung R1 kase mag
ge gain siya 4%.
17. Lets take a look naman dun sa perspective ng Firm 1, naka enclose naman sa rectangle yung
best response ng firm 1 dun sa mga strategies na gagamitin ng firm 2.
18. First kapag ginamit ng Firm 2 yung R1, yung best response ng firm 1 sa strategy na to is yung C1
kase mag ge gain siya ng 2%.
19. Sinabi natin kanina na yung negative number is gain for firm 1 and lost for firm 2.
20. Next, kapag ginamit ng firm 2 yung R2, yung best response for firm 1 is yung C2 kase ito yung
less loss na makukuha niya compare dun sa ibang strategy.
21. Last, kapag yung firm 2 ginamit yung R3, yung best reponse for firm 1 is yung C3 kase mag
gegain siya ng 5%.
22. So makikita natin sa table na meron yung payoff ng dalawa is naka enclose ng both circle and
rectangle, yung R2 ng firm 2 and C2 ng firm 1.
23. So ito yung equilibrium strategy ng both firms or tinatawag din na nash equilibrium.
24. Mag gegain ng 2% yung firm 2 while and firm 1loss 2%.
25. So even na pwede pa rin naman magpalit ng strategy yung firm 1 para maka gain ng profit,
hindi yun yung best strategy na dapat niyang gawin.
26. So tignan natin kapag nagpalit ng strategy yung firm 1 and choose yung C1.
27. Take note na alam ng kalaban yung mga gagawin mo na pagpapalit, so yung response niya is
gamitin yung R3 which is the best reponse for C1 ng Firm 1.
28. Kase mag gegain yung firm 2 ng 7% tapos lalaki lang din yung loss ng firm 1, magiging 7% yung
loss niya.
29. What if gamitin niya naman yung C3, alam ulit natin na alam ng firm 2 yung mga gagawin ng
firm 1 so gagamitin niya yung best response niya sa C1, which is yung R1. na mag ge gain siya
ng 5% gamit ito at magkakaroon naman ng loss na 5 % yung firm 1.
30. Makikita natin na walang pupuntahan yung pagpapalit ng strategy ng firm 1 kase mag gegain
lang siya ng mas malaking loss sa income niya.
31. So need niya talagang mag stick dun sa equilibrium strategy niya to minimize yung loss sa pay
off niya.
32. Same din to sa mangyayare sa firm 2 kapag nag seek pa rin siya ng mas malaking pay off at di
nakuntento sa 2% na gain niya sa equilibrium strategy.
33. So lets take a look kapag nag palit ng strategy yung firm 2 para kumuha ng mas malaking profit.
34. Lets say na gusto niya gamitin yung R3 para maka kuha ng 7% na payoff, knowing na alam ng
firm 1 yug gagawin ng firm 2.
35. So gagamitin ng firm 1 yung best response niya dun sa strategy ng firm 2 na R3 which is C3.
36. Magkakaroon ngayon ng 5% loss yung firm 2 at magkakaroon naman ng gain yung firm 1 ng
5%.
37. Makikita natin yung impact ng pagpapalit ng strategy is hindi nakakatulong sa payoff ng bawat
competitor.
38. So need ng every competitor na mag stick lang sa equilibrium strategy nila. Para ma maximize
nila yung sarili nilang pay off at ma minimize yung payoff ng kalaban nila.
39. The Value of the Game is the resulting equilibrium outcome.

Difference of Dominant Strategy Equilibrium and Nash Equilibrium

1. In a dominant-strategy equilibrium, each player chooses an action that is a best response

against any action the other might take.
2. Dun sa dominant-strategy equilibrium, bawat player is merong clear best choice of action
regardless kung anong gagawin ng ibang player.
3. In other words, yung strategy that is best for a player to use is the same regardless dun sa
strategies na pipiliin ng ibang player.
4. Dun sa example kanina na TV ratings, yung pang schedule hit show nila ng 8PM is the
dominant strategy equilibrium.
5. Regardless anong piliin ng CBS, yung dominant strategy ng NBC is yung pag schedule ng
8PM pa rin.
6. In a Nash equilibrium, each player takes an action that is the best response to the action
the other takes.
7. Dun naman sa Nash equilibrium, bawat strategy ng player is yun yung best response niya
dun sa strategy ng ibang player.
8. So parang yung sinabi nga natin kanina na, nagkakaroon ng nash equilibrium kapag walang
pupuntahan yung pagpapalit ng strategy kung hindi naman magpapalit yung kalaban nila.

Prisoners Dilema

1. So prisoners dilemma is na discuss na nung last week.

2. So recap lang, prisoners dilemma is a game that demonstrates how two individuals may
not cooperate, even if it is in their best interests to do so.
 COMPETITIVE STRATEGY

1. Strategic decisions by managers embrace an interesting mixture of competition and cooperation.

2. Firms compete via price wars, patent races, capacity expansion, and entry deterrence. But they also
cooperate through joint ventures, the adoption of common standards, and implicit agreements to
maintain high prices.
3. So lets take a look sa isang example ng cooperation through common standard.
4. A COMMON STANDARD FOR HIGH-DEFINITION DVDS.
5. Nung early 2000’s, merong debate between sa dalawang companies, Sony at Toshiba, about kung
anong gagamitin nilang format ng DVD in the future generation.
6. Sony and a group of members promoted the Blu-ray format while Toshiba and group promoted HD
format.
7. If a movie or video game was recorded in the Blu-ray format, so hindi siya pwedeng iplay on a
player or device that supported only the HD format, and vice versa.
8. Sony Corporation led a group of companies including Samsung, Matsushita, Philips, Dell Computer,
and Hewlett-Packard promoting the so-called Blu-ray format.
9. The opposing side, led by Toshiba Corporation and backed by NEC Corporation and Microsoft,
developed the HD format.
10. For more than two years, the corporate players formed alliances and pushed their preferred
formats.
11. The Blu-ray group enlisted movie studios like Twentieth Century Fox and Walt Disney.
12. The HD group counted NBC and Universal studios in its camp, and
13. studios such as Warner Brothers and Paramount Pictures pledged to release movies in both
formats.
14. Makikita natin sa Payoff table na to yung sari-sarili nilang payoff in each format.
15. Both formats had their own advantages, pero hindi sila compatible sa bawat isa.
16. Ibig sabihin hindi pwedeng magkaiba sila ng format na gagamitin kase mas mababa yung payoff
makukuha nila kapag hindi sila parehas ng format.
17. For example, makikita sa table na kapag yung sony is nag adopt ng blu-ray magkakaroon siya ng 30
na payoff while 20 kapag yung Toshiba is nag adopt ng HD format.
18. Ganun din kapag yung Sony is nag adopt ng HD format then yung Toshiba nag adopt ng Blu-Ray
format, magkakaroon sila ng 0 na payoff.
19. Lets compare naman kapag parehas sila ng ginamit na format.
20. Pag parehas silang gumamit ng Blu-Ray format magkakaroon sila ng pay off na 100 sa Sony and 50
sa Toshiba.
21. Pag parehas namn silang nag adopt ng HD format, makakakuha sila ng payoff na 60 sa Sony and 90
sa Toshiba.
22. Makikita dito yung dalawang dominant strategy, una yung upper right corner yung dominant
strategy ng Sony which is pag adopt ng Blu ray format.
23. Yung dominant strategy Naman ng Toshiba is nasa lower right corner which pag adopt ng HD
format.
24. Parehas na strategy na ito is parehas na dominant strategy in this competition. Ang problema aling
dominant strategy yung I aadopt ng dalawang company.
25. Coordination between Sony and Toshiba was crucial para mag agree sila on a common standard for
the next generation of DVDs.
26. Dahil kung mag kaiba, magkakaroon ng confussion sa mga consumers kung anong klaseng
technology yung bibilhin nila kase sabi nga kanina kapag yung Blu ray format na video or games is
hindi ma pe play sa mga device na supported lang ng Toshiba, and vice versa.
27. Both side would receive much lower pay off, na makikita naman sa Table.
28. So yung coordinations is important para sa kanilang sariling interest para maximize nila yung
kanilang payoffs.
29. . Pero, mahirap ma achieve yung coordination kapag each sides have strongly opposed views kung
anong format yung I aadopt nila pareho.
30. It takes a lot of negotiation and bargaining power to reach a common agreement.

31. In fact, situations like this are often referred to as the "battle of the sexes," kung saan yung two
parties is merong opposing views on a decision but ultimately must come to a compromise for
mutual benefit.
32. This concept can be applied to any bargaining situation.
33. A bargaining situation is a situation where two or more parties come together to negotiate a deal
or agreement.
34. In the case of the DVD standards dispute, the Sony group and the Toshiba group were in a
bargaining situation as they were trying to negotiate and reach an agreement on which format for
the next generation of DVDs should be adopted.
35. The dispute was resolved in early 2008, with the Blu-ray format emerging as the winning standard.

36. The outcome of the dispute was due to a cumulative series of factors, including:
37. Sony's decision to include Blu-ray players in its PlayStation 3 game consoles, attracted video gamers
to the format.
38. The support of major video distributors and retailers such as Blockbuster, Netflix, Best Buy, and
Wal-Mart.
39. The critical mass of studios, distributors, and retailers supporting the Blu-ray format.
40. Warner Bros., the leading video distributor, releasing its features exclusively in Blu-ray
41. These factors combined to create a critical mass of support for the Blu-ray format, effectively
claiming the upper-left equilibrium in Table 10.4, and making it the dominant standard in the
market.