1 / 11

Game Theory

Game Theory. Game 3 Your Value to a Game. Your Value to a Game. You: Director of a commercial-free music video channel Cable companies pay to carry you You make a take-it-or-leave it offer Cable Companies: Each channel has $100K in value Cable companies have varying capacities ( k )

ugo
Download Presentation

Game Theory

An Image/Link below is provided (as is) to download presentation Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author. Content is provided to you AS IS for your information and personal use only. Download presentation by click this link. While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server. During download, if you can't get a presentation, the file might be deleted by the publisher.

E N D

Presentation Transcript

  1. Game Theory Game 3 Your Value to a Game

  2. Your Value to a Game • You: • Director of a commercial-free music video channel • Cable companies pay to carry you • You make a take-it-or-leave it offer • Cable Companies: • Each channel has $100K in value • Cable companies have varying capacities (k) • Select the k best (lowest) offers • Market 1: 50, Market 2: 30, Market 3: 20

  3. Your Value to a Game Your added value = the size of the pie when you are in the game minus the size of the pie when you are not

  4. Unlimited Capacity (k=50) Unlimited Capacity • What is your value to the game? • What is the total value of the game? • How much should you be paid to play?

  5. Class Results • Most requested 100 • Or 99, or 99.99 • But…some LOVE the cable company • A few requested less than 50 • One requested 8 • One requested 5

  6. Slightly Limited Capacity (k=30) Perception of Bargaining Power • What is your value to the game? • What is your perceived value? • What is the total value of the game? • How much should you be paid to play?

  7. Limited Capacity (k=20) Perception of Bargaining Power • What is your value to the game? • What is the total value of the game? • How much should you be paid to play?

  8. Payoff Summary

  9. Intuition • By reducing capacity • I lower your added value • I gain bargaining power • I get a better price per channel • I gain higher profits overall • But: • The value of the game is smaller

  10. Best Score maximum profit = 100 + 74 + 25 = 199 • Sameer 100 + 60 + 25 = 185 • Tyler G, Brandon, Josh W., David 100 + 50 + 25 = 175

  11. Others • Swinging for the fences • Benjamin 100 + 100 +100 = 100 • Playing it safe • Eric 100 + 1 + 1 = 102 • Playing it very very safe • Jewel 5+5+ 5 = 15

More Related