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Strategic
decisions & Working Capital (WC)
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Investment
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Modes of diversification
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Inter-Organizational relationships
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Long-Term
Financial decisions |
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Investment
analysis and decision |
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Game
theory
What is game theory
?
- The systematic study of behaviour
in situations involving interdependencies
between at least two actors
- Examines situations in which
a player in a game is affected by what others
do (or do not do) and, in turn, that player's
actions affect others
- A systematic way to develop
strategies when one firm's fortune depends
on what other firms do
What game theory has
to offer ?
- Game theory focuses directly
on finding the right strategies and making
the right decisions
- Game theory is particularly
effective when
- they are many interdependent
factors
- no decision can be made
in isolation from a host of other decisions
- Game theory provides a common
language for discussing alternatives and
helps build a consensus
- Game theory is a way of thinking
- an approach you can expand and build on.
Elements of a game
- Players : agents (two or
more firms) who participate in the game,
make choices and receive payoffs
- Payoffs : reward or punishment
result of a game, ideally measured in utility
(each firm attempts to maximize its profit)
- Rules : who are the players
? What are the payoffs ? Who knows what
? etc...
- Actions : choices that players
can make (each firm is aware that other
firm's actions can affect its profit).
The third element is the crucial
one. Oligopolistic
markets differ from competitive
and monopolistic markets because each firm's
actions significantly affect its rivals.
The
prisoner's Dilemma is a simultaneous
game with dominant strategies. Theorem : for
any game with a finite number of sequential
moves, there exists some best strategy (e.g.
entry into an industry or not...)
Economic
theories derivated from the game theory
:
Sources
:
Modern Industrial Organization, 2nd edition, Dennis .W. Carlton , Jeffrey .M. Peroloff, Addfison-Wesley, 1994
Economie Industrielle ( traduction de la 2ème édition par Fabrice Mazerolle), Dennis .W. Carlton , Jeffrey .M. Peroloff, de Boeck Université, 1998
Gaining and Soustaining Competitive Advantage, Jay. B. Barney, Addison-Wesley, 1997
Contemporary Strategic Analysis, Robert M. Grant, 3th edition, Blackwell, 1998
Strategic Management, Raphael Amit, Professor at Wharton University of Pennsylvania, US
Cours de Microéconomie,
Bernard Jaquier, Ecole Hôtelière
de Lausanne, 2003
(c) ECOFINE, Bernard Jaquier, Professor in Economics
and Finance, Switzerland, 2020
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