1. Read the article titled “Game Theory” at http://www.econlib.org/library/Enc1/GameTheory.html. In the article, the authors discussed a classic case of game theory (zero-sum games) of the Prisoner’s Dilemma (PD). There are many variations of this game in use. Suggest the manner in which organizations could apply PD to their business’ strategy formulation. Provide support for your response.
2. Use the Internet to research two to three (2-3) articles on the North American automobile and its market segments. Next, analyze the key ways that segmentation provides a competitive advantage or disadvantage to the North American automobile. Provide a rationale for your response.
The author made it clear that the outcome of any game is dependent on the strategies applied. It can be in form of cooperative or conflict to gain advantage. This PD has been a prevailing issues across all industries. Either in Automobile or in Food chain industry, Tech companies et cetra have all engaged in competition and still ongoing. Another example is in the Airline industry. Organization could apply PD base on the industry they operate, what is the economy driver, cost analysis and goals to meet the objective. Example is with the Airline industry, Delta started applying the Prisoner’s Delima in its organization when it began to increase airfare and baggage fees to substantiate fuel costs and other maintenance issues associated with airline services in general, creating equilibrium. Delta expect other carriers to follow suit. However, if Delta was the only airline to increase its prices (dominant) and other competitors begin to see a rise in their sales viewing it as a competitive advantage and didn’t follow suit (dominated); all of the airlines would experience a less than desired outcome (Delta – would experience less profits due to customers going to other airlines to book travel) and (competitive airlines – would experience the costs of high priced fuel, in which their increase in sales during that specific timeframe wouldn’t exponentially increase their profits enough to maintain lower priced airfare).
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