Game Theory – in practice

Sa zicem ca sunt in sesiune. Asadar, studiez. Printre studiile mele de astazi, am gasit un exemplu simpatic pentru a ilustra teoria jocurilor( pe o piata de oligopol ). Imi cer scuze, dar este in engleza si nu intentionez sa-l traduc. Daca nu va intereseaza subiectul, dati click aici si ascultati o melodie faina.

As every student knows, the way to learn something is to copy the relevant article and then to absorb it through osmosis. As a result, copy shops often spring up near colleges. In the early 1970s, four firms in the Harvard Square area of Cambridge, Massachusetts, satisfied a large portion of the copy business of students from Harvard, MIT, Tufts, and other colleges in the area.

Initially, the smallest of the “big four” firms, Copy Cat Educational Services Inc. charged much higher prices than its larger competitors. Then Jimmy Jacobs, the owner of the clothing store and copying service, lowered his prices to a level that the other firms contented was too low to make profits.

One competitor, Gnomon Copy, posted a sign in its window on the “Xerox Price Story”. Gnomon charged that Jacobs “had sent word to the other Xerox services in Harvad Square that he was going to drive them all out of business… if they did not raise their prices to match his, which were then  substantially higher than the going rate”.

Gnomon said it was meeting Copy Cat’s price in Harvard Square in order not to lose customers, but that it would keep its prices at its other stores at their previous levels, which Gnomon considered “to be fair and reasonable”. They urged customers to boycott Copy Cat, claiming, “You may pay a higher price today, but you will insure a viable competitive situation for the future.”

Within hours of the posting of Gnomon’s sign, according to Gnomon employees, Jacobs barged into their shop and said “You call your boss and tell him he’s got five minutes to take that down or I’ll photograph it and use it in a libel suit.” Upon reflection, Gnomon management decided it had not gone far enough and assigned an employee to hand out leaflets in front of Jacob’s copy center/clothing store. In turn, Jacobs filmed the leafleteers in the presence of a reporter, while a Gnomon salesperson was frantically searching for her camera to photograph Jacobs photographing everyone else. According to the reporter, “When the Gnomon salesperson ran out of notices, he began modeling his clothes. Mr Jacobs laughed and kept filming”.

The other firms did not lower their prices at first, and their business suffered. These other firms supported Gnomon’s charge that Jacobs tried to get them to fix their prices at a higher level and threatened to punish them by undercutting their prices if they did not cooperate. Jacobs said that he believed that all the firms had been charging too much and that he had decided to lower his prices, but only to a level where he could still make profits. He vigorously denied any attempt to fix prices.

Eventually prices in Harvard Square settled at a lower level, though cost changes may have been partially responsible. This example illustrates how firms try to influence their rivals’ actions through their own price or output decisions and through communications when the game is played repeatedly.

Source: McLellan, Vin – “Harvard Square: War of the Xerox Machines” (1971); (poza)