Game Theory Game 8 Option Value

Possible Outcomes Enter Alone Both Enter Do Not Enter Success: 300-100 = 200 Failure: -100 = -100 50 Both Enter Success: 200-100 = 100 Failure: -100 = -100 0 Do Not Enter Success: 150-100 = 50 Failure: = 0 25

The Game Game of Chicken Firm 2 Enter Wait Firm 1 0 , 0 50 , 25 0 , 0 50 , 25 25 , 50 25 , 25

Option Value If commit: If do not commit: Expected earnings of between 50 and 0 If both enter: expected earnings of 0 If do not commit: Do not take a chance at a loss Expected profit: 25

Class Results Enter: 28 (80%) Wait: 7 (20%) Enters: success failure Both (10): 4 6 One (7): 4 3 Neither (0): 0 0 8 9

Profits Enter Wait Alone Succeed 200 4 Together Succeed 100 8 Fail -100 16 EXPECTED PROFIT: 0 Wait Succeed 50 4 Fail 0 3 EXPECTED PROFIT: 29

What’s Luck Got to Do With It? Enter alone, succeed: Hans Michael M. Tanner Ziyi

Bad Luck … (Bad Market Research?) A-Ja Je-Z Alex Alexa Colin Courtney Fan Isabel Jamie K. Jamie W. Jeff Luis Michael F. Steven Taylor M. Taylor P. Will Yuda

Commitment Under Uncertainty  Potentially greater profits Flexibility  Avoidance of potential losses Tradeoff  Depends on actions of others