1、LOGOThe Right Game:Use Game Theory to Shape Strategy管理学专业英语教程（第四版管理学专业英语教程（第四版上）上）Fudan UniversityLOGOFudan UniversityA New View of BusinessExpressions borrowed from the military and from sportsNot about winning and losingNor is it about how well you play the game LanguageDifferenceEssence:Making su
2、re youre playing the right gameHOW?Game TheoryLOGOFudan UniversityGame Theory Came of AgeJohn von NeumannOskar Morgenstern1994Provided a systematic way to understand the behavior of players in situations where their fortunes are interdependentDefine two types of games:I.Rule Based GamesII.Freewheeli
3、ng gamesLOGOFudan UniversityFreewheeling games,players interact without any external constraints.Rule-based games,players interact according to specified rules of engagement.Two Types of GamesTwo types of gamesBusiness is a mix of two typesLOGOFudan UniversityRule-based GamesvThe principle:To every
4、action,there is a reaction LOGOFudan UniversityFreewheeling GamesvThe principle:You cannot take away from the game more than you bring to it LOGOFudan UniversityA Shift in PerspectiveEgocentricity Traditional perspectiveFocus on ones own position.Fudan UniversityAllocentrism Perspective of game theo
5、ryFocus on othersLOGOFudan UniversityShaping the Game GM Casev Actively shape the gameFudan Universityv Play the game you findv Use game theoryv More profitv General Motor CaseLOGOFudan UniversityGM CasevBackground:vIn the early 1990s,the U.S.automobile industry was locked into an all-too-familiar m
6、ode of destructive competition.vRebates and dealer discount were ruining the industry.Fudan UniversityWas there a way out?vGMShare or Conquest?vIn Sep.1992,GM and Household Bank issued a new credit card,that cardholders could apply 5%of their charges toward buying or leasing a new GM car.What happen
7、ed?vGMGreat Achievementsv1.2 million accounts,one month laterv8.7 million accounts,two year laterv30%of GMs nonfleet sales in North America will be to cardholdersLOGOFudan UniversityGM CasevHow does win-win dynamic run?vIt replaced other incentives that GM had previously offered v Net effect has bee
8、n to raise the price that a noncard-hold would have to pay for a GM carv These people would intend to buy other cars,like Ford v Thus this program allow Ford to raise its prices.v That allows GM,in turn,to raise its prices without losing customers to Ford.Fudan UniversityWhats the problem of imitati
9、on from others?vImitation is not always harmfulvImitation help GM Ford and Volkswagen offset the cost of their credit card rebates by scaling back other incentive programs.vThis led an effective price for GM customers,the vast majority of whom do not participate in the Ford and Volkswagen credit car
10、d programs.LOGOFudan UniversityAdvantages of Win-win Strategies Fudan UniversityLess resistance to win-win moves from others,making them easier to implementGreater potential for finding new opportunitiesThe new game is more sustainableImitation of a win-win move is beneficial,not harmfulLOGOFudan Un
11、iversity“Coopetition”vThinking about both cooperative and competitive ways to change the game vIt means looking for win-win as well as win-lose opportunitiesFudan UniversityWhats the role of game-theory models in competition?Please find the answer in Text 2LOGOFudan UniversityText(2)Competition and
12、Game Theoryv Classical theory of perfect competitionAdam SmithAlfred Marshall Classical theory depicts the outcome of competition,but not the activity of competing.v New game-theoretic modelsv This theory view competition as a process of strategic decision making that is performed under uncertainty.
13、v It considers“rivalry”and“public revelation of private information”.LOGOFudan UniversityCompetition contv Price items when buyers willingness to pay is unknownv Being a source of bargaining power.Whats the role of game-theory models?v They generate an efficient allocation of resources.v They add mi
14、cro detail to the classical theory.HOW?LOGOFudan UniversityDesigning New Competitive MechanismsUnderstand how competitive markets functionUse high-speed computersInvention of New Markets1.Goods are idiosyncratic and differentiated2.There are particular buyers and sellersLOGOFudan Universityv Applica
15、tion I:Firms buy inputs from other firms.v Simultaneous Auction Mechanism v Procuring firm:Define the components finely;Have the potential suppliers bid component by componentsv Supplier:reveal its economies of scope by ser of components for which it bid.v Application II:Sale of a multidivisional co
16、rporationv Allow buyers to bid division by divisionv E.g.the Federal Communications Commissions sectrum license auctions Designing New Competitive MechanismsLOGOFudan UniversityCompetition Reveals Hidden Informationv Introduction:Independent-private-values CaseBUYER:Competing bidders attaches a diff
17、erent,subjective value to an item;They all know exactly how much it would be worth to themselves;But they dont know others valuationSELLER:Being ignorant of the bidders valuationsWhat will happen?LOGOFudan UniversityCompetition Reveals Hidden Informationv Introduction:Independent-private-values Case
18、BUYER:Bid until the price passes his or her valuationSELLER:The price gives the seller an estimate of the items valueWhen the number of bidders is reasonably large,the price reached in the auction can be close to the winning bidders valuationThis is a process of revealing hidden information?LOGOFuda
19、n UniversityCompetition Reveals Hidden Informationv Common-value caseBUYER:value objectively rather than subjectivelyItem is worth the same no matter who wins itNo one knows what the true value of this item The winner is likely to be the bidder who has most overestimated the items value.What will ha
20、ppen?Even if no one knows the accurate value,the competitive process serves to aggregate the scattered information so that the market price is a more accurate estimate of value than individualsAn application is customer bidding in an auction by HoffmanLOGOFudan UniversityCompetition Works Better tha
21、n Bargainingv Bargaining Casev One buyerv Seller is well informedv The seller doesnt know the buyers valuation exactlyv The seller know the range of possible valuationsv Bidding Casev Two buyersv Seller passively accept bids without setting a minimum pricev The seller doesnt know anything about buyer1.Seller is better off the extra buyers in bidding case and simply sell to the highest bidder than with the other bidders2.The buyers actively set a minimum price by bidding competition1.The seller must know the range of possible buyer valuations&compute the best price to charge
