IDEAS home Printed from https://ideas.repec.org/h/spr/mgmchp/978-981-10-5729-8_8.html
   My bibliography  Save this book chapter

Competitive Analysis: Game Theory

In: Strategic Management Accounting

Author

Listed:
  • Wing Sun Li

    (Beijing Normal University–Hong Kong Baptist University)

Abstract

s A firm could not make proper pricing decisions without taking due regards to market’s interactive responses. However, it is not easy to calculate competitor’s dynamic responses to price changes. This dynamic process arises from the firm’s relative market power and also from its rivals’ response – what are the responses of rivals with respect to the pricing decision. Game theory provides a methodology of speculating rivals’ reciprocal responses given the intended actions. This chapter discusses how game theory can be used to speculate rival’s response to price change given some rational behavioral assumptions. It explicitly seeks an optimal decision making when each player carefully considers the likely actions and reactions of its rivals. It assumes that players are rational and self-interested and can always make decisions based on expectations of its rivals’ different courses of actions. This chapter introduces basic concepts of game theory and focuses discussions on simultaneous move and noncooperative conditions. It explains how to identify strictly dominant strategy and Nash equilibrium (based on the choice of the rival) and employ this technique to seek the optimal price decision in various payoff scenarios. As price is largely determined by the relative market power of the firm and its rivals, this chapter also explicates how firms decide price and/or output level to optimize the market influence. Examples and a case on tendering are provided to demonstrate how this powerful analytical approach can be used.

Suggested Citation

  • Wing Sun Li, 2018. "Competitive Analysis: Game Theory," Management for Professionals, in: Strategic Management Accounting, chapter 8, pages 143-156, Springer.
    • Handle: RePEc:spr:mgmchp:978-981-10-5729-8_8
    DOI: 10.1007/978-981-10-5729-8_8
    as

    Download full text from publisher

    To our knowledge, this item is not available for download. To find whether it is available, there are three options:
    1. Check below whether another version of this item is available online.
    2. Check on the provider's web page whether it is in fact available.
    3. Perform a search for a similarly titled item that would be available.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:spr:mgmchp:978-981-10-5729-8_8. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Sonal Shukla or Springer Nature Abstracting and Indexing (email available below). General contact details of provider: http://www.springer.com .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.