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Hi, I am looking for someone to write an article on game theory in business applications Paper must be at least 1750 words. Please, no plagiarized work!
Hi, I am looking for someone to write an article on game theory in business applications Paper must be at least 1750 words. Please, no plagiarized work! Pricing decisions by a firm cannot be made in a vacuum. Firms decide prices in order to fulfill their objectives of revenue and profitability. Even a monopoly firm has to consider the pricing strategy from a point of view of its influence on others (non-participants) in the market. Firms in monopoly markets may at times do not charge the highest possible price as they fear that might bring in competition. In oligopoly market, the decisions to lower or increase the prices are often determined by taking into consideration the likely moves by the competitor. Thus a firm’s pricing decision is dependent on other decisions that are strategically determined. Thus game theory helps a firm in deciding the best price by considering the competitors’ likely changes in the prices. Firms in oligopoly, when indulging in price wars, end up with the same market share with no significant rise in sales but a sure reduction in revenues and profits.
For example - In 2002 AMD slashed its prices just after the price cut by arch-rival i.e. Intel. This reflected that the company was not ready to give up market share even if it were to come at the cost of profitability. Thus Intel’s price cut could not bring excess market share to any of them but did certainly reduce their revenues. (“AMD cuts prices to match Intel”)
When a firm considers an advertising decision, it aims at a specific level of sales or market share increase. The effectiveness, of a firm’s advertising and other promotional efforts is determined not just by the intensity of the promotional efforts by the firm, but it is also highly contingent on the decisions which are made by the competitors. If the competitors also run similar campaigns or more intense campaigns, the impact of the firm’s advertising and promotion will be nullified. In oligopoly firms often spend heavily on advertising with no significant gain in unit or revenue sales. The market .shares also do not change. The firms ultimately restore the erstwhile equilibrium, however with a substantial hit in their profit figures. This is also an example of a game theory problem called a prisoner’s dilemma. .
