Game Theory 4
Hi, for this assignment are lectures 19,20 and 21, Answer the following questions. Each of your answers should be an essay of up to 250 words (with a typical font and spacing this will be up to 1 page). Refer to the lectures and the texts as needed. 1. Consider a business in which units take time to produce and storage can be expensive. Would you expect such a business to compete by setting quantity or by setting price? 2. Explain the nature of the winner’s curse and why it occurs in a common-value auction. Why is the winner’s curse not a problem for private-value auctions? 3. Suppose that three different versions of a bill (A, B, and C) appear before a committee of 12 people. a. Four people prefer version A to version B to Version C. b. Four people prefer version B to version C to version A. c. Four people prefer version C to version A to Version B. Because there is no majority, the chair of the committee will first hold a vote between two of the alternatives, then the winner of this vote will face the remaining bill version. Show using game theory that if people vote their preferences, the chair effectively chooses which version will be the winner.
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Introduction
The primary reason why businesses are set up is so as to make profits. The only way to make this achievement is to remain competitive, always seeking to curve a niche for themselves in the vast market. The strategy adopted by each business to remain competitive is largely determined by the nature of the business. This means that there is no universal strategy that can work or all the businesses. Instead, each must adopt a specific strategy that is well cut out to match to the business needs. A business owner must at all times remain alert as far as the crucial needs of the organization are concerned and take appropriate step as each case may require.
Competitive Strategy
In a case where the time taken by units to make production is longer than usual and yet the storage of the same units is expense, a unique strategy must be adopted to remain competitive. Setting of quantity in such a case may prove t be somewhat to be tricky. The fact that the units take a long time before giving production mean that the business is likely to have certain times when the business is very low on supply. This is not a good trend for the business that is seeking to remain competitive in the market (Stevens, 2008). When customers seek products severally and cannot find, they are likely to shift to another business, and are unlikely to come back. In addition, where the storage has been found to be expensive, it means the business cannot at any one time have a lot of the units in excess. This is because when overheads such as storage or other costs of production are very high, they tend to eat into the profit. This renders null the essence of a profit making. In a case such as this, wisdom demands that business owners should consider setting prices as their competitive strategy. Practicability in this case would involve setting the prices, as there are not many stringent conditions attached to the price as with the quantity. In order to succeed, the business will have to conduct some researches in the market. This will help to ascertain the prices that have been set by rival businesses. The business can then know the most competitive price likely to help the...