Core Disciplines: Business Statistics; Economics
DESCRIPTION: Economic game theory can be a tedious and difficult concept, but it doesn’t have to be. This exercise allows students to learn about game theory via an entertaining medium – video games. After considering a pricing war between two video game giants, Microsoft and Sony, students are asked to calculate pricing strategies based off game theory predictions. Students must use a 2-by-2 simultaneous one-shot game (like the Prisoner's Dilemma framework) to determine if one or both companies will cut prices.
TEACHING POINTS: After discussing this case study, students will be able to: Apply the Prisoners' Dilemma game to the context of pricing Ascertain which costs are relevant for game analysis and determine appropriate payoffs Apply a variety of other basic microeconomic concepts, including own-price elasticity of demand and the relationship between price elasticity and short-run monopoly profit maximization.
Secondary Tags: Consumer Products
Sales Rank: #2
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