《管理经济学讲稿

Managerial EconomicsManagerial Economics管理经济学讲稿专业班级：信息管理与信息系统大类任课教师：吴如雪教材：Managerial Economics 7th EditionS.Charles MauriceChristopher R.Tomas机械工业出版社CHAP 14.Strategic Decision Making in Oligopoly Markets14.1 Characteristics of oligopolyl Oligopoly is a market structure in which only a few sellers offer similar or identical products. It consists of a few relatively large firms, each with a substantial share of the market and all recognize their mutual interdependence. Mutual interdependence means that the actions of any one firm in the market will have an effect on the sales and revenues of other firms. Each firm knows that its actions or changes will have such an effect and that the other firms will, in response, take actions or make changes that will affect its sales. But no firm is really sure how the other firms will reactthere is an uncertainty about the reaction of rivals to a price change. Common characteristics: (1) The number of firms in an oljgopoly market is small enough that each firm recognizes its mutual interdependence with the other firms. (2) All oligopolies have a certain amount of market power. If an oligopolist raises its price, it generally wont lose all its sales; if it lowers its price, it wont gain the entire market. (3) Oligopoly markets are characterized by some barriers to entry, ranging from moderate to high. Differing characteristics: (1) Oligopolies can be classified by the type of product produced. In some oligopoly markets the products are homogeneous. Other oligopoly markets are characterized by differentiated products. (2) Oligopolies can be Cooperative or noncooperative : Cooperative oligopolists tend to follow changes made by rival firms. Noncooperative oligopolists, on the other hand, do not accommodate such changes. (3 ) Some oligopolistic market are characterized by a great deal of price competition. In others, firms dont compete extensively by price changes but instead compete with their advertising, product quality, and marketing strategies. Four general oligopolistic market structures: (1) A few noncooperative firms producing a homogeneous product, (2) A few noncooperative firms producing related but differentiated products, (3) A few cooperative firms producing a homogeneous product, (4) A few cooperative firms producing related but differentiated products. Because oligopoly markets differ so greatly in their behavior patterns and in their overall characteristic, economists have not been able to develop a single general theory of oligopoly, unlike the case for the other three market structures we have analyzed.l The problem with oligopoly demand: In spite of the uncertainty of rivals to a price change, managers of oligopolies should use the marginal revenuemarginal cost rule when making decisions. This is one of the most important rules of decision making, even when the market is characterized by uncertainty about the reaction of rivals. The problem for an oligopolist is accurately forecasting its demand and marginal revenue if it changes its price. Any change in price and output has a noticeable effect on the sales of other firms. These rivals may react by changing their prices and output, or they may not react at all. In our discussion of oligopoly markets, we will emphasize that the price and output decisions depend critically upon the assumptions made about the behavioral reactions of rival managers. Since many different assumptions can and have been made, many different solutions can and have been reached.14.2 Decision making when rivals make simultaneous decisionsOligopolists are mutual interdependence. Mutual interdependence requires strategic behavior. We cant give a set of rules to follow. The art of making strategic decisions is learned from experience. We can, however, introduce a tool for thinking about strategic decision making.l Game theory provides a useful guideline on how to behave in strategic situations involving interdependence. This theory was developed approximately 50 years ago in order to provide a systematic approach to strategic decision making. A game is any decision-making situation where people compete with each other for the purpose of gaining the greatest individual payoff, rather than group payoff, from playing the game. In the game of oligopoly, the people in the game, often called “players”, are managers of the oligopoly firm. Payoffs in the oligopoly game are the individual profits earned by each firm. Simultaneous decision games occur in oligopoly markets when managers must make their individual decisions without knowing the decisions of their rivals. Decisions dont have to take place at the same time in order to be “simultaneous”.l The prisoners dilemmaa widely known game of simultaneous decision making The story (page 533) Payoff table is a table showing, for every possible combination of decisions players can make, the outcomes or “payoffs” for each of the players in each decision combination.Payoff table:BillDont confessConfess2years, 2years12years, 1year1year, 12years6years, 6yearsJonesDont confessConfess Common knowledge is a situation in which all decision makers know the payoff table, and they believe all other decision makers also know the payoff table. This common knowledge of the payoff table plays a crucial role in determining the outcome of a simultaneous decision game. A dominant strategy in a game theory is a strategy or action that always provides the best outcome no matter what decisions rivals make. The prisoners dilemma illustrates a way of predicting the likely outcome of a strategic game using the concept of a dominant strategy. In the prisoners dilemma, confessing is a dominant strategy for each suspect.When a dominant strategy exists, a rational decision maker always chooses to follow its own dominant strategy and predicts that if its rivals have dominant strategy, they also will choose to follow their dominant strategy. The outcome of a game in which both players have dominant strategies and play them is called a dominant-strategy equilibrium. When all decision makers have dominant strategies (and know their dominant strategies), managers will be able to predict the actions of their rivals with a great deal of certainty.Most strategic situations, in contrast to the prisoners dilemma game, do not have a dominant-strategy equilibrium.l Decisions with one dominant strategy An example of Pizza Castle and Pizza PalacePayoff table:Palaces price High($10)Low ($6)$1,000, $1,000$500, $1,200$1,200, $300$400, $400Castles priceHigh($10)Low ($6)Pizza Palace has a dominant strategy: price low at $6. Pizza Castle does not have a dominant strategy When a firm does not have a dominant strategy, but at least one of its rivals does have a dominant strategy, the firms manager can predict with confidence that its rivals will follow their dominant strategies. Then, the manager can choose its own best strategy, knowing the actions that will almost certainly be taken by those rivals possessing dominant strategies.Knowing that Palaces manager will rationally choose to set price low at $6, Castles manager will likely decided to price high at $10 (and give away soft drinks).l Successive elimination of dominated strategies: When deciding what to do in a simultaneous decision situation, managers should eliminate from consideration dominated strategies. Dominated strategies are strategies that would never be chosen because at least one other strategy provides a higher payoff no matter what rivals choose to do. Successive elimination of dominated strategies is an iterative decision-making process in which managers first eliminate all dominated strategies in the original payoff table. Eliminating dominated strategies always simplifies a decision-making problem.In a simultaneous decision having no dominant strategy equilibrium, managers can simplify their decisions by eliminating all dominated strategies that may exist. The process of elimination should be repeated until no more dominated strategies turn up.Strategically astute managers always search first for dominant strategies, and, if no dominant strategies can be discovered, they next look for dominated strategies. Unfortunately, simultaneous decision frequently fail to provide managers with either dominant or dominated strategies.l Nash equilibrium: Making mutually best decisions (will be introduced in OR)In the absence of any form of strategic dominance, managers must use a different, but related, guiding concept for making simultaneous decisions. This concept, known as Nash equilibrium, can sometimes, but not always, guide managers in making simultaneous decisions. In order for all firms in an oligopoly market to be predicting correctly each others decision, all firms must to be choosing individually best actions given the predicted actions of their rivals. It follows, then, that strategically astute managers will search the payoff table for mutually best decisions: cells in the payoff table in which all managers are doing the best they can given their beliefs about the other managers actions. Nash equilibrium is a set of actions for which all managers are choosing their best actions given the actions chosen by their rivals. Strategic stability: Since all decisions are mutually best decisions in Nash equilibrium, no single firm can unilaterally make a different decision and do better. This property or condition of Nash equilibrium is known as strategic stability, and it provides the fundamental reason for believing that strategic decision makers will likely decide on a Nash pair of decisions. An example of Nash equilibrium: Super Bowl Advertising (P543-545)Pepsis budgetLowMediumHigh$60,$45$57.5,$50$45,$35$50,$35$65,$30$30,$25$45,$10$60,$20$50,$40LowCokes budgetMediumHigh(Payoffs in millions of dollars of semiannual profit)Neither Pepsi nor Coke has a dominant strategy or dominated strategy. The only Nash equilibrium is (High, High).When managers face a simultaneous decision-making situation possessing a unique Nash equilibrium set of decisions, rivals can be expected to make the decisions leading to the Nash equilibrium. If there are multiple Nash equilibria, there is generally no way to predict the likely outcome.l Best-response curves and continuous decision choices In many decisions, actions or strategies are continuous decision variables. When managers make pricing decisions, they seldom view the choices as being either ”low” or “high” prices. In stead they choose the best price from a continuous range of prices. Best-response curves is a tool to analyze and explain simultaneous decisions when decision choices are continuous rather discrete. Best-response curves give managers the profit-maximizing price to set given the price they anticipate their rival will set. An example: P548-552. The following demand curves is common knowledge:，Thus,，Letand, then we have two best-response curves:，A Nash equilibrium occurs at the price pair where the firms best-response curves intersect:,14.3 Strategy when rivals make sequential decisionsl Sequential decisionsdecisions in which one firm makes its decision first, then a rival firm makes its decision. Even though they are made at different times, sequential decisions involve strategic interdependence. Strategically astute managers must think ahead to anticipate their rivals future decisions. Current decisions are based on what manager believes rivals will likely do in the future.l Making sequential decisions: we use game trees to analyze sequential decisions. A game tree is a diagram showing the structure and payoff of a sequential decision situation. It has decision nodes with branches extending from the nodes. Decision nodespoints in a game tree, represented by boxes, where decisions are made. A game tree usually proceeds from left to right along branches until final payoffs associated with each decision path are reached.(Figure 14.3: a game treeCastle go first) Roll-back method (backward induction)method of finding a Nash solution to a sequential decision by looking ahead to future decisions to reason back to the best current decision. When firms making sequential decisions, managers make best decisions for themselves using roll-back method. The roll-back method results in a unique path that is a Nash decision path: each firm does the best for itself given the best decisions made by its rivals.l First-mover and second-mover advantageThe outcomes of some sequential decisions depend on which firm makes its decision first and which firm goes second. First-mover advantageSometimes a firm can increase its payoff by making its decision first. Second-mover advantageSometimes a firm can increase its payoff by letting its rivals make the decision first. How can we tell whether a sequential decision has a first-mover advantage or a second-mover advantage, or neither type of advantage? The simplest way, and frequently the only way, is to find the roll-back solution for both sequences. If the payoff increases by being the first (second) to move, then a first-mover (second-mover) advantage exists. If the payoffs are identical, then order of play confers no advantage.It is difficult to determine which firm goes first (second) when both firms recognize that going first (second) confers a first-mover (second-mover) advantage.l Strategic moves: commitments, threats, and promisesThere are three kinds of actions that firm might employ to alter the structure of a game to their advantage: commitments, threats, and promises. CommitmentsUnconditional strategic moves taken for the purpose of increasing payoffs to the committing firm. Managers make commitments by announcing, or demonstrating to rivals in some other way, that they will bind themselves to take a particular action or make a specific decision no matter what action or decision is taken by its rivals.An example: P557 Figure 14.4. Motorola seizes the first mover advantage an ensure its outcome in cell A by building a facility in Brazil specifically designed for manufacturing and serving only analog phones. ThreatsConditional strategic moves that take the form:” If you do A, I will do B, which is costly to you.” The purpose of making threats is to manipulate rivals beliefs about the likely behavior of the threatening firms in a way that increases payoffs to the threatening firms. PromisesConditional strategic moves that take the form:” If you do A, I will do B, which is desirable to you.”These three strategic moves must be made before rivals have made their decisions. They may be utilized separately or in combination with each other. Strategic moves will achieve their desired effects only if rivals think the firms making the moves will actually carry out their commitments, threats, or promises. Only credible strategic moves matter. Rivals will ignore strategic moves that are not credible.14.4 Strategic entry deterrencel Strategic entry deterrence: Managers of firms in oligopoly markets sometimes use d