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: 26 (68%) Wait: 12 (32%) Enters: success failure Both (9): 5 4 One (8): 3 5 Neither (2): 2 0 10 9

Profits Enter Wait Alone Succeed 200 3 Together Succeed 100 10 Fail -100 13 EXPECTED PROFIT: 12 Wait Succeed 50 7 Fail 0 5 EXPECTED PROFIT: 29

What’s Luck Got to Do With It? Enter alone, succeed: Connor Sonny Justin V.

Bad Luck … (Bad Market Research?) A-M N-Z Cameron C. Christian C. Hannah F. Ian M. Joe D. Martin M. Noah S. Nora M. Peter J. Ryan F. Shrey P. Tony J. Tyler D.

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