【正文】 , 0, 0 , 125, 50, 75 , 125 75, 50 100, 100 10 15 10 15 78 Chapter 1 Choosing Output Firm 1 Firm 2 , , 0, 0 , 125, 50, 75 , 125 75, 50 100, 100 10 15 10 15 ? This payoff matrix illustrates various outes ? Move together, both produce 10 ? Question ? What if Firm 1 moves first? 79 Chapter 1 Threats, Commitments, and Credibility ? Strategic Moves ? What actions can a firm take to gain advantage in the marketplace? ?Deter entry ?Induce petitors to reduce output, leave, raise price ?Implicit agreements that benefit one firm 80 Chapter 1 ? How To Make the First Move ? Demonstrate Commitment ? Firm 1 must constrain his behavior to the extent Firm 2 is convinced that he is mitted Threats, Commitments, and Credibility 81 Chapter 1 ? Empty Threats ? If a firm will be worse off if it charges a low price, the threat of a low price is not credible in the eyes of the petitors. Threats, Commitments, and Credibility 82 Chapter 1 Pricing of Computers and Word Processors Firm 1 High Price Low Price High Price Low Price Firm 2 100, 80 80, 100 10, 20 20, 0 83 Chapter 1 Pricing of Computers and Word Processors Firm 1 High Price Low Price High Price Low Price Firm 2 100, 80 80, 100 10, 20 20, 0 ? Question ? Can Firm 1 force Firm 2 to charge a high price by threatening to lower its price? 84 Chapter 1 ? Scenario ? Race Car Motors, Inc. (RCM) produces cars ? Far Out Engines (FOE) produces specialty car engines and sells most of them to RCM ? Sequential game with RCM as the leader ? FOE has no power to threaten to build big since RCM controls output. Threats, Commitments, and Credibility 85 Chapter 1 Production Choice Problem Far Out Engines Small cars Big cars Small engines Big engines Race Car Motors 3, 6 3, 0 8, 3 1, 1 86 Chapter 1 ? Question ? How could FOE force RCM to shift to big cars? Threats, Commitments, and Credibility 87 Chapter 1 Modified Production Choice Problem 0, 6 0, 0 8, 3 1, 1 Far Out Engines Small cars Big cars Small engines Big engines Race Car Motors 88 Chapter 1 ? Questions 1) What is the risk of this strategy? 2) How could irrational behavior give FOE some power to control output? Modified Production Choice Problem 89 Chapter 1 WalMart Stores’ Preemptive Investment Strategy ? Question ? How did WalMart bee the largest retailer in the . when many established retail chains were closing their doors? ?Hint ? How did WalMart gain monopoly power? ? Preemptive game with Nash equilibrium 90 Chapter 1 The Discount Store Preemption Game WalMart Enter Don’t enter Enter Don’t enter Company X 10, 10 20, 0 0, 0 0, 20 91 Chapter 1 The Discount Store Preemption Game WalMart Enter Don’t enter Enter Don’t enter Company X 10, 10 20, 0 0, 0 0, 20 ? Two Nash equilibrium ? Low left ? Upper right ? Must be preemptive to win 92 Chapter 1 Entry Deterrence ? To deter entry, the incumbent firm must convince any potential petitor that entry will be unprofitable. 93 Chapter 1 Entry Possibilities Incumbent Enter Stay out High price (acmodation) Low Price (warfare) Potential Entrant 100, 20 200, 0 130, 0 70, 10 94 Chapter 1 Entry Deterrence ? Scenario ? Incumbent monopolist (I) and prospective entrant (X) ? X single cost = $80 million to build plant 95 Chapter 1 Entry Deterrence ? Scenario ? If X does not enter I makes a profit of $200 million. ? If X enters and charges a high price I earns a profit of $100 million and X earns $20 million. ? If X enters and charges a low price I earns a profit of $70 million and X earns $10 million. 96 Chapter 1 Entry Deterrence ? Question ? How could I keep X out? ?Is the threat credible? 97 Chapter 1 Entry Deterrence ? How could I keep X out? 1) Make an investment before entry (irrevocable mitment) 2) Irrational behavior 98 Chapter 1 Entry Deterrence Incumbent Enter Stay out High price (acmodation) Low Price (warfare) Potential Entrant 50, 20 150, 0 130, 0 70, 10 After $50 million Early Investment 99 Chapter 1 Entry Deterrence Incumbent Enter Stay out High price (acmodation) Low Price (warfare) Potential Entrant 50, 20 150, 0 130, 0 70, 10 After $50 million Early Investment ? Warfare likely ? X will stay out 100 Chapter 1 ? Airbus vs. Boeing ? Without Airbus being subsidized, the payoff matrix for the two firms would differ significantly from one showing subsidization. Entry Deterrence 101 Chapter 1 Development of a New Aircraft Boeing Produce Don’t produce Airbus 10, 10 100, 0 0, 0 0, 120 Produce Don’t produce 102 Chapter 1 Development of a New Aircraft Boeing Produce Don’t produce Airbus 10, 10 100, 0 0, 0 0, 120 Produce Don’t produce ? Boeing will produce ? Airbus will not produce 103 Chapter 1 Development of a Aircraft After European Subsidy Boeing Produce Don’t produce Airbus 10, 10 100, 0 0, 0 0, 120 Produce Don’t produce 104 Chapter 1 Boeing Produce Don’t produce Airbus 10, 10 100, 0 0, 0 0, 120 Produce Don’t produce ? Airbus will produce ? Boeing will not produce Development of a Aircraft After European Subsidy 105 Chapter 1 Diaper Wars ? Even though there are only two major firms, petition is intense. ? The petition occurs mostly in the form of costreducing innovation. 106 Chapter 1 Competing Through R D PG RD No RD RD No RD KimberlyClark 40, 20 80, 20 60, 40 20, 60 107 Chapter 1 Competing Through R D PG RD No RD RD No RD KimberlyClark 40, 20 80, 20 60, 40 20, 60 ? Both spend on RD ? Question ? Why not cooperate 10