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The High-Definition TV Game (DN, p. 121)

Japanese Effort. Low. High. The High-Definition TV Game (DN, p. 121). Low. 4,3. 2,4. U.S. effort. High. 3,2. 1,1. Payoffs to: U.S., Japan. If the U.S. Moves First. Payoffs to: (U.S., Japan). If Japan Moves First. Dixit and Nalebuff, p. 122. The Disadvantage of Flexibility.

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The High-Definition TV Game (DN, p. 121)

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  1. Japanese Effort Low High The High-Definition TV Game (DN, p. 121) Low 4,3 2,4 U.S. effort High 3,2 1,1 Payoffs to: U.S., Japan

  2. If the U.S. Moves First Payoffs to: (U.S., Japan)

  3. If Japan Moves First Dixit and Nalebuff, p. 122.

  4. The Disadvantage of Flexibility Not in Dixit and Nalebuff.

  5. “Any carpenter can turn a tree into a table, but a strategist can turn a table into a tree.” A Clever Aphorism:

  6. THREAT: A response rule that punishes others who fail to act as I wish them to. (I will fire you if you are a minute late for work.) WARNING: A statement telling others what bad things it will be in my self-interest to do to them if they fail to act as I wish them to. (I will fire you if you become an alcoholic and can't perform like you used to.) PROMISE: A response rule that rewards others who act as I wish them to. (I will give you a ten dollar tip if you provide good service in this restaurant.) ASSURANCE: A statement telling others what good things it will be in my self-interest to do for them if they act as I wish them to. (I like initiative, and will promote you even if your innovative idea turns out to be a failure.) This classification is from Dixit and Nalebuff, p. 126. Threats and Warnings

  7. Cournot Competition If Qb = 120, Apex lets Brydox take the market Brydox is a monopoly if Qa = 0 Apex is a monopoly if Qb = 0 If Qa = 120, Brydox lets Apex take the market How Apex reacts How Brydox reacts Putting them together

  8. Stackelberg Competition The Stackelberg equilibrium is the point on Brydox’s reaction curve that Apex likes best. Apex moves first, choosing output of 60, and Brydox responds with output of 30.

  9. Bertrand Competition (see p. 76 of Dixit and Nalebuff)

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