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List of
games in Chapter 10 Mixed Strategies Using Comlabgames |
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Game
title (right click on the game to download it) |
Short
description of the experiment |
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Game 10.1: Matching pennies in the strategic form |
There are two
players: Player 1, a column player and Player 2, a row player. Each player
can choose between two choices: heads and tails. If both choose tails, or
heads then Player 2 receives 1 and Player 1 receives -1; otherwise Player 2
receives -1 and Player 1, 1. |
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Game 10.2: Parking meter in the strategic form |
A shopper considers
whether or not to feed the meter. At $1.00 an hour she requires 4 eight
quarters to complete her 2 hour excursion, and if she does not pay, and the
patrol checks her meter within that hour, a fine of $10.00 is levied. The
patrol is rewarded on its success in discovering parking violations. An alternative
use of the patrol's time would be to spend less time checking meters and more
time in the air conditioned patrol car. |
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Game 10.3: Taxation in the strategic form |
There are two
players in this game: a taxpayer (the business) and a collection agency. A
business recognizes that if it honestly reports is income over the tax
period, it will be liable for $4 million. There are, however, two
alternatives to truthful reporting. The business pays no tax if it
fraudulently claims to have made no net income, and is not audited. If
caught, it pays a penalty of 200 percent on its tax burden, and must pay $12
million in total. The second option is to make a plausible error that reduces
but not eliminate the tax burden. This can be more easily detected by the
collection agency but is only penalized by 100 percent of the tax burden. The
accounting irregularity reduces taxes by $2 million. Thus the firm pays $6
million in total if audited or if its accounting arithmetic is checked. The
objective of the collection agency is to maximize net revenue within its
legislative charter. Checking for accounting regularities costs the
collection agency $1 million, but conducting a full audit twice as expensive,
$2 million. |
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There are two
players in this game: Ware who10 years ago received a patent for Dentosite that has captured 60 percent share in the
market and National was the largest supplier of material for dental
prosthetics before Dentosite. The new material is
found. If the technique is feasible then Ware would have just as good chance
as National of being the first to prove it. If Ware develops it first they
could extend the patent protection to these techniques and prevent any
competitors. There are two choices that Ware and National face: to develop
(in) or not to develop the product (out). |
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When firms over invest
in a new market, industry watchers are often critical of the naive
expectation held by each firm in not properly anticipating the actions of its
rivals. The recent collapse of the broadband cable laying market is just a
recent illustration of this phenomenon. However the following analysis castes
doubt on the hypothesis that such problems would not arise if the managers
involved in these debacles were replaced by more intelligent and
strategically savvy players. In the broadband game we assume that if only
firm enters, then the value of the firm will rise by $10 billion, but if two
firms enter both will both suffer losses of $1billion. I both of the firms
stay out they receive $0. |
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Accordingly,
suppose an incumbent firm currently has a monopoly in a market, and at the
initial node of the game, a rival chooses between end the monopoly and enter
its market, or stay out. After the rival makes its decision, the incumbent
firm chooses between producing less output to accommodate both firms and thus
maintain the market price, much versus to produce the same output as before
causing the price to fall sharply to prevent inventory accumulation. The
extensive form of this entry game is depicted in Figure 8.7. Solving the game
using backwards induction, the first rule of strategic play implies that the
rival should enter and the incumbent should acquiesce. |
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