Zero Sum Games
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Minimising the other company's profit may be a WAY to drive it out of the market. But the final GOAL of a company is maximize profits. Or at least that is a very good aproximation to what they do.
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When I sat my third year microeconomics course, it suddenly dawned on me. The assumptions under game theory were too simple. Why not change the assumption from a profit making firm (the example in which I had to examine), to a firm that minimises the profit of it's competitor. Although, in theory, this may make the original firm unprofitable, profit minimisation of your competitior might be a sufficiently credible threat to prevent entry.
|09/25/2001 06:15 AM by Chris Edwards; Problems with Elementary Game Theory|
What do you guys think? Have any papers been written about that sort of thing? [Manage messages]