Game Theory and Business Applications (International Series in Operations Research & Management Science)
Format: PDF / Kindle (mobi) / ePub
Game theory has been applied to a growing list of practical problems, from antitrust analysis to monetary policy; from the design of auction institutions to the structuring of incentives within firms; from patent races to dispute resolution. The purpose of Game Theory and Business Applications is to show how game theory can be used to model and analyze business decisions. The contents of this revised edition contain a wide variety of business functions – from accounting to operations, from marketing to strategy to organizational design. In addition, specific application areas include market competition, law and economics, bargaining and dispute resolution, and competitive bidding. All of these applications involve competitive decision settings, specifically situations where a number of economic agents in pursuit of their own self-interests and in accordance with the institutional “rules of the game” take actions that together affect all of their fortunes. As this volume demonstrates, game theory provides a compelling guide for analyzing business decisions and strategies.
because the bankruptcy process forces it to delay its decision. The bankrupt firm becomes a follower in a Stackelberg investment game instead of a simultaneous mover in a Nash-Cournot game. Brander and Lewis (1986) and Maksimovic (1986) analyze the role of debt as a precommitment device in oligopoly models. By taking on a large amount of debt a firm effectively precommits to a higher level of output. Titman (1984) and Maksimovic and Titman (1993) have considered the interaction between financial
participation. A divisional manager will perceive as a fixed wage, since it is unaffected by any of his actions (though it is affected by his message). It is clear from (2.16) and (2.17) that so can be interpreted as a sharing parameter. The manager’s compensation scheme is thus a very simple linear scheme, consisting of a fixed salary plus a bonus whose size is proportional to deviations from the assigned budget. However, the parameters of the compensation scheme vary with the messages
sequentially rational choice of is with respect to If is not very sensitive to then the benefits to decreasing more than offset the costs, so Conversely, when is sufficiently sensitive to changes in then optimally In general, the value of and the sensitivity of with respect to depends in some complex way on the size of (K+S) and the shape and support of the density function. This implies that in a dynamic setting, the evolution of equilibrium audit prices, Game Theory Models in Accounting 81
Organizations,” in Y. Ho and S. Mitters (Eds.) Directions in Large Scale Systems: Many Person Optimization and Decentralized Control, Plenum, New York. Groves, T. and M. Loeb. (1979), “Incentives in a Divisionalized Firm,” Management Science, 25, 221230. Hirshleifer, J. (19??), “On the Economics of Transfer Pricing,” Journal of Business, 29, 172-184. Holmstrom, B. (1979), “Moral Hazard and Observability,” Bell Journal of Economics, 10, 74-91. Holmstrom, B. (1982), “Moral Hazard in Teams,” Bell
Li and Whang conclude by considering three explanations for high market concentration (the evolution of a few dominant firms) in the software industry. One cause is the existence of network externalities. A second stems from learning effects both on the buyers’ side (consumers prefer familiar software) and the seller’s side (large suppliers learn through experience how to deliver higher quality and lower costs). A third source of concentration particular to software is its enormous development