The analysis of a price war strategy under market demand growth |
| |
Authors: | Ming-Chung Chang Yung-Ho Chiu |
| |
Affiliation: | aDepartment of Risk Management, Kainan University, Taiwan;bDepartment of Economics, Soochow University, Taiwan |
| |
Abstract: | We use the finite repeated Prisoners' Dilemma game model herein to discuss how firms choose their optimal strategy under a price war with market demand growth. This model has two players: one is an R-type player and the other is a TFT-type player. Each player has two strategies to choose from: a preemption strategy and a “wait” strategy. Our results indicate that: (i) if the probability that the opponent is an R-type (TFT-type) player is high, then the time when the opponent adopts a preemption strategy will be early (late); (ii) Market demand growth is an incentive for cooperation among firms; (iii) if the market demand growth rate is high, then the R-type player will not have an evolutionary advantage. We use the competition between cell phone manufacturing firms Nokia and Motorola in China as an example. When Nokia is an R-type player and adopts a preemption strategy, Motorola should preferably use a preemption strategy rather than a “wait” strategy. However, as a TFT-type player, this will benefit Motorola under the situation of market demand growth. |
| |
Keywords: | Strategy Prisoners'Dilemma game Market demand growth |
本文献已被 ScienceDirect 等数据库收录! |
|