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# Profound Thought.

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The reverse business sector interest for comic books is P = 11-Q (in dollars) ... So Marvel ought to create 3 comic books, which leads DC Comics to deliver 3 and produce benefit of 6 for ...
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﻿Profound Thought I cherish going down to the grade school, observing every one of the children bounce and yell, yet they don\'t know I\'m utilizing spaces. ~ Jack Handey . (Interpretation: Today\'s lesson instructs when you that your adversaries know your activities so you can control their responses.) BA 210 Lesson II.3 Sequential Quantity Competition

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Lesson outline Lesson II.1 Strategic Bargaining Lesson II.2 Bargaining and Impatience Lesson II.3 Sequential Quantity Competition Example 1: Stackelberg Duopoly Example 2: First Mover Advantage Example 3: Selling Technology Example 4: Colluding Example 5: Merging Summary Review Questions BA 210 Lesson II.3 Sequential Quantity Competition

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Example 1: Stackelberg Duopoly Example 1: Stackelberg Duopoly BA 210 Lesson II.3 Sequential Quantity Competition

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Example 1: Stackelberg Duopoly Comment: Stackelberg Duopoly Games have three sections. Players are directors of two firms serving numerous shoppers. Firm 1 is the pioneer, and acts before Firm 2, the supporter. Techniques are yields of homogeneous items (impeccable substitutes), so they offer at the same value P. Firm 1 picks yield Q 1 > 0. Firm 2 knows Firm 1\'s Q 1 > 0 preceding he picks his own. Adjustments are benefits. At the point when unit generation expenses are constants c 1 and c 2 , then benefits are P 1 = (P-c 1 ) Q 1 and P 2 = (P-c 2 ) Q 2 BA 210 Lesson II.3 Sequential Quantity Competition

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Example 1: Stackelberg Duopoly Payoffs for the two players frequently recorded in a table. The systems are recorded as lines for Player 1, and sections for Player 2. The blend of systems by both players decides a cell in the result table, and that cell determines the settlements to the players, with Player 1 recorded first. For instance, if Player 1 picks Q 1 =3 and Player 2 picks Q 1 =1, then in the result table beneath 12,5 indicates result 12 to Player 1 and 5 to Player 2. BA 210 Lesson II.3 Sequential Quantity Competition

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Example 1: Stackelberg Duopoly Question: You are a supervisor of Marvel Comics and you contend specifically with DC Comics offering comic books. Shoppers observe the two items to be undefined. The converse business sector interest for comic books is P = 11-Q (in dollars). Your unit expenses of generation are \$3, and the unit expenses of DC Comics are \$2. Process benefits when you deliver 1 units and DC produces 4 units. Assume benefits from different blends of creation are in the table underneath: BA 210 Lesson II.3 Sequential Quantity Competition

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Example 1: Stackelberg Duopoly Question (proceeded with): Suppose you pick your yield of comic books to be either 1, 3, or 4 preceding DC Comics, and DC Comics knows your yield before they choose their own yield of either 1, 3, or 4. What number of comic books would it be a good idea for you to create? BA 210 Lesson II.3 Sequential Quantity Competition

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Example 1: Stackelberg Duopoly Answer: You are the pioneer in a Stackelberg Duopoly Game with reverse interest P = 11 - (Q 1 +Q 2 ) and unit costs c 1 = 3 and c 2 = 2. In the event that you deliver Q 1 =1 units and DC produces Q 2 =4 units, then aggregate yield is Q 1 +Q 2 =5, so cost is P = 11 - (Q 1 +Q 2 )=6, and benefits are P 1 = (P-c 1 )Q 1 = (6-3)1 = 3 and P 2 = (P-c 2 )Q 2 = (6-2)4 = 16, which we compose 3,16 to finish the benefit table. BA 210 Lesson II.3 Sequential Quantity Competition

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Example 1: Stackelberg Duopoly Find the rollback answer for the Stackelberg Duopoly Game. Beginning from the end of the diversion, if Marvel has picked Q 1 =1, then DC will react with Q 2 =4, thus benefits are 3 for Marvel and 16 for DC if Q 1 =3, then Q 2 =3, thus benefits are 6 and 9 if Q 1 =4, then Q 2 =3, thus benefits are 4 and 6 BA 210 Lesson II.3 Sequential Quantity Competition

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Example 1: Stackelberg Duopoly So Marvel ought to create 3 comic books, which drives DC Comics to deliver 3 and produce benefit of 6 for Marvel. BA 210 Lesson II.3 Sequential Quantity Competition

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Example 2: First Mover Advantage Example 2: First Mover Advantage BA 210 Lesson II.3 Sequential Quantity Competition

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Example 2: First Mover Advantage Comment: If the unit generation expenses are the same for the pioneer and the supporter in a Stackelberg duopoly, then the pioneer creates progressively and makes more benefit. Specifically, a firm can think that its beneficial to wind up the principal mover by hurrying to set up a sequential construction system, regardless of the fact that it implies expanding unit expenses of creation. BA 210 Lesson II.3 Sequential Quantity Competition

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Example 2: First Mover Advantage Question: You are the supervisor of Kleenex and you contend specifically with Puffs offering facial tissues in America. Shoppers observe the two items to be vague. The converse business sector interest for facial tissues is P = 11-Q (in dollars) in America and both firms produce at a unit expense of \$2. You have a choice to make about contending with Puffs in New Zealand, where the opposite business sector interest for facial tissues is P = 11-Q (in dollars), and both you and Puffs can pick a yield amount 1, 3, or 6. You should pick the alternative that is best for Kleenex. BA 210 Lesson II.3 Sequential Quantity Competition

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Example 2: First Mover Advantage Option A. Puffs sets up its manufacturing plants and conveyance arranges now, and you set up later. What\'s more, both produce at a unit expense of \$2, bringing about the principal benefit table: Option B. You hustle set up your manufacturing plants and appropriation arranges now, and Puffs sets up later. Your rush means your unit expenses are \$3, while Puffs unit costs remain \$2 bringing about the second benefit table: BA 210 Lesson II.3 Sequential Quantity Competition

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Example 2: First Mover Advantage Answer: In Option A, you are the adherent in a Stackelberg Duopoly. Puffs expects your responses on the privilege, thus delivers 6, you respond with 1 thus you acquire 2 . In Option B, you are the pioneer in a Stackelberg Duopoly. You foresee Puffs\' responses on the privilege, thus create 6, Puffs responds with 1 thus you gain 6 . BA 210 Lesson II.3 Sequential Quantity Competition

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Example 2: First Mover Advantage Option B is accordingly best for Kleenex since Kleenex benefits (as an adherent) are 2 in Option A, while Kleenex benefits (as the pioneer) are 6 in Option B. BA 210 Lesson II.3 Sequential Quantity Competition

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Example 2: First Mover Advantage Comment: In this specific case, Kleenex expanded creation cost hurt benefits not as much as benefits increment as a result of the principal mover advantage, so it merits being the primary mover. In different issues, expanded creation cost hurt benefits more than benefits increment on account of the principal mover advantage, so it is not worth being the main mover. BA 210 Lesson II.3 Sequential Quantity Competition

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Example 3: Selling Technology Example 3: Selling Technology BA 210 Lesson II.3 Sequential Quantity Competition

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Example 3: Selling Technology Question: You are an administrator of Home Depot and your lone noteworthy rival in the retail home change business sector is Lowes. You hope to open the main home change store in the Conejo Valley, and Lowes will take after a month. Your timber and Lowes\' wood are vague to customers. The backwards advertise interest for timber is P = 4 - Q (in dollars) and both firms used to create at a unit expense of \$2. Be that as it may, you simply found a superior approach to treat lumber, which diminishes your unit expense to \$1. Should you remain quiet about that methodology? On the other hand is it better to offer that mystery to Lowes so that both you and Lowes can deliver at unit cost equivalent to \$1? To answer the inquiry, assume both Home Depot and Lowes independently create either 0, or 1, or 3 units of timber. BA 210 Lesson II.3 Sequential Quantity Competition

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Example 4: Selling Technology Answer: You are the pioneer in a Stackelberg Duopoly with backwards request P = 4 - (Q 1 +Q 2 ) . Contrast the rollback arrangement and unit costs c 1 = 1 and c 2 = 2, to the arrangement with c 1 = 1 and c 2 = 1. To begin with, register the result table and rollback answer for unit costs c 1 = 1 and c 2 = 2: BA 210 Lesson II.3 Sequential Quantity Competition

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Example 4: Selling Technology You are the pioneer in a Stackelberg Duopoly. You expect Lowes\' responses underneath, thus deliver 1, Lowes responds with 1 thus you procure 1 or 2 and Lowes gains 0 . BA 210 Lesson II.3 Sequential Quantity Competition

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Example 4: Selling Technology Next , register the result table and rollback answer for unit costs c 1 = 1 and c 2 = 1: BA 210 Lesson II.3 Sequential Quantity Competition

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Example 4: Selling Technology You are the pioneer in a Stackelberg Duopoly. You expect Lowes\' responses beneath, thus deliver 1, Lowes responds with 1 thus you acquire 1 and Lowes gains 1 . BA 210 Lesson II.3 Sequential Quantity Competition

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Example 4: Selling Technology Selling innovation and lessening c 2 = 2 to c 2 = 1 needs to impacts: Firm 1\'s benefit decreases from P 1 = 1 or 2 to P 1 = 1 for beyond any doubt Firm 2\'s benefit increments from P 2 = 0 to P 2 = 1 specifically, offering innovation builds complete benefit P 1 + P 2 from the questionable consequence of 1 or 2 to the sureness of 2. Offering innovation is in this way a haggling issue between Home Depot and Lowes, and the division of the positive increase from offering innovation is controlled by the principles of bartering. For instance, if Home Depot can make an accept the only choice available offer to Lowes, then Lowes ought to acknowledge anything as being superior to anything nothing. Subsequent to finding that, Home Depot\'s best worthy offer to Lowes leaves Lowes with an allowance of the additions, which implies Lowes pays the full 1 unit of benefit for the innovation. BA 210 Lesson II.3 Sequentia

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