Competition Wang Yusong School of Management Fudan University
9-1 Competition Competition Wang Yusong School of Management Fudan University
Reviewing Questions a what are the advantages and disadvantages of being the first mover? What are the key factors that will influence entry decisions in an emerging market in countries such as china
9-2 Reviewing Questions What are the advantages and What are the advantages and disadvantages of being the first mover? disadvantages of being the first mover? What are the key factors that will What are the key factors that will influence entry decisions in an emerging influence entry decisions in an emerging market in countries such as China? market in countries such as China?
China's market for commercial banks is opening 1. For foreign banks entering china, what kind of entry strategies should they take? Please justify your argument. 2. For foreign banks entering china, what other marketing/business strategies should they take? please justify your argument 3. How should domestic Chinese banks prepare themselves for the competition from foreign banks?
9-3 China's market for commercial banks is opening… 1. For foreign banks entering china, what For foreign banks entering china, what kind of entry strategies should they take? kind of entry strategies should they take? Please justify your argument. Please justify your argument. 2. For foreign banks entering china, what For foreign banks entering china, what other marketing/business strategies other marketing/business strategies should they take? Please justify your should they take? Please justify your argument. argument. 3. How should domestic Chinese banks How should domestic Chinese banks prepare themselves for the competition prepare themselves for the competition from foreign banks? from foreign banks?
Discussion about Market Exit Strategies Why is mr Cheng considering moving to other countries? Any exit barrier? In your opinion, what industries are more likely to move out of China? What industries are more likely to stay in China? why Is there any marketing and business planning suggestions you could give mr Cheng?
9-4 Discussion About Market Exit Strategies Why is Mr. Cheng considering moving Why is Mr. Cheng considering moving to other countries? Any exit barrier? to other countries? Any exit barrier? In your opinion, what industries are In your opinion, what industries are more likely to move out of China? What more likely to move out of China? What industries are more likely to stay in industries are more likely to stay in China? Why? China? Why? Is there any marketing and business Is there any marketing and business planning suggestions you could give Mr. planning suggestions you could give Mr. Cheng?
Basic Ideas of Game Theory Game theory is the general theory of strategic behavior Generally depicted in mathematical form. Plays an important role in modern economics
9-5 Basic Ideas of Game Theory Game theory Game theory is the general theory of is the general theory of strategic behavior. strategic behavior. • Generally depicted in mathematical form. Generally depicted in mathematical form. • Plays an important role in modern Plays an important role in modern economics. economics
Rules, Strategies, Payoffs, and equilibrium a Economic situations are treated as games The rules of the game state who can do what and when they can do it a players strategy is a plan for actions in each possible situation in the game
9-6 Rules, Strategies, Payoffs, and Equilibrium Economic situations are treated as games. Economic situations are treated as games. • The rules of the game state who can do what, of the game state who can do what, and when they can do it. and when they can do it. • A player's A player's strategy strategy is a plan for actions in is a plan for actions in each possible situation in the game. each possible situation in the game
Prisoner's dilemma Confess Don't Confess Confess (-8,-8) (0,-15) Don't Confess(-15, 0)
9-7 Prisoner’s Dilemma Confess Don’t Confess 1 2 Confess Don’t Confess ( -8, -8) ( -15, 0) ( 0, -15) ( -1, -1)
Rules, Strategies, Payoffs, and equilibrium a Economic situations are treated as games a players payoff is the amount that the player wins or loses in a particular situation In a game o a players has a dominant strategy if that players best strategy does not depend on what other players do
9-8 Rules, Strategies, Payoffs, and Equilibrium Economic situations are treated as games. Economic situations are treated as games. • A player's A player's payoff is the amount that the is the amount that the player wins or loses in a particular situation player wins or loses in a particular situation in a game. in a game. • A players has a A players has a dominant strategy dominant strategy if that if that player's best strategy does not depend on player's best strategy does not depend on what other players do. what other players do
Nash Equilibrium a Occurs when each player 's strategy is optimal, given the strategies of the other players. a player's best response(or best strategy)is the strategy that maximizes that players payoff, given the strategies of other players. A Nash equilibrium is a situation in which each player makes his or her best response
9-9 Nash Equilibrium Occurs when each player's strategy is Occurs when each player's strategy is optimal, given the strategies of the other optimal, given the strategies of the other players. players. • A player's A player's best response best response (or best strategy) is (or best strategy) is the strategy that maximizes that player's the strategy that maximizes that player's payoff, given the strategies of other players. payoff, given the strategies of other players. • A Nash equilibrium Nash equilibrium is a situation in which is a situation in which each player makes his or her best response. each player makes his or her best response
A Sequential Game New Firm Chooses New Firm Enters New firm does not enter Monopoly Monopoly Chooses Chooses High Price Low Price High Price oW Price Monopoly gets Monopoly gets Monopoly gets Monopoly gets $3, New firm gets $0, New firm gets $5, New firm gets $2, New firm gets $2 -$1(S millions) $o
9-10 A Sequential Game New Firm Chooses New Firm Enters New Firm Does Not Enter Monopoly gets $3, New firm gets $2 High Price Low Price Monopoly Chooses Monopoly gets $5, New firm gets $0 Monopoly gets $2, New firm gets $0 Monopoly Chooses Monopoly gets $0, New firm gets –$1 High Price Low Price ($ millions)