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Chapter 14: Problem 1

What is a sequential game?

Short Answer

Expert verified
A sequential game is a strategic game where players make their decisions one after another, implying that some players have more information than others because they make decisions later in the sequence. Sequential games often represented with a game tree, and a practical example is a game of chess.

Step by step solution

01

Definition of a sequential game

A sequential game is a type of game in strategic form games where players make their decisions one after another. This means the player who makes a decision later in the sequence has more information than those making decisions earlier in the sequence.
02

Comparison to simultaneous games

In contrast to simultaneous games where every player makes a decision without being aware of their opponents' choices, a player in a sequential game has an opportunity to respond to the actions of their opponent.
03

Representation of Sequential Games

Sequential games are often represented through a game tree (also known as an extensive form). Each vertex represents a player’s decision, and each edge is labeled by a decision made by a player at that point. The payoffs are displayed at the leaf nodes (the end of the game tree).
04

Example of Sequential Games

One common example of a sequential game is chess. Players take turns to move their pieces, and each player makes decisions based on the observation of the previous moves from another player.

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Most popular questions from this chapter

In 2017, Best Buy had the following price matching policy posted to its Web site: At the time of sale, we price match all local retail competitors (including their online prices) and we price match products shipped from and sold by these major online retailers: Amazon.com, Bhphotovideo.com, Crutchfield.com, Dell.com, HP.com, Newegg.com, and TigerDirect.com. Is Best Buy's policy likely to result in lower prices or higher prices on televisions and other products it sells in competition with Amazon and local brick-and-mortar stores? Briefly explain.

Michael Porter argued that in many industries, "strategies converge and competition becomes a series of races down identical paths that no one can win." Briefly explain whether firms in these industries will likely earn economic profits.

What is a prisoner's dilemma game? Is the outcome of the game likely to be different in a repeated game? Briefly explain.

Suppose there are four large manufacturers of toilet tissue. The largest of these manufacturers announces that it will raise its prices by 15 percent due to higher paper costs. Within three days, the other three large toilet tissue manufacturers announce similar price hikes. Would this decision to raise prices be evidence of explicit collusion among the four companies? Briefly explain.

(Related to Solved Problem 14.2 on page 487 ) UPS and FedEx both struggle to deliver the surge of packages they receive during the December holiday season. According to an article in the Wall Street Journal, in 2014 , both firms considered charging Amazon and other firms rates that would be 10 percent higher for packages delivered during the week before Christmas. Such higher rates would likely have increased the profits of both firms. Neither UPS nor FedEx actually raised rates during the 2014 holiday season, but both firms did raise them during the 2016 holiday season. Use game theory to explain why in 2014 neither firm raised rates during the holiday season, but two years later both firms did.
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