The Prisoners' Dilemma in the Airline Industry
The Prisoners’ Dilemma in the airplane industry
Games of Strategy Home Assignment
Tamás Seres
Introduction 3
The Prisoners’ Dilemma 3
An Oligopolistic market: 5
The Case Study 6
Conclusion 8
References: 8
Introduction
In today’s world the Prisoners’ Dilemma is a common phenomenon in business, politics and in social life as well. This paper will analyze a real life example. It will describe the airplane manufacturing industry and their two giant manufacturers: Airbus and Boeing. The two companies find themselves in a business environment where both parties take the others decision into consideration and act in respect of those. The companies can have two choices: to cooperate with each other for higher prices or to compete at lower price to win more customers. The case study is played in a special business environment where only two companies are operating on the market. The action of one company has major effect on its competitor. Therefore it is essential for the players to analyze the decision of their competitor. Firstly I would like to present the Prisoners’ Dilemma in detail. Afterwards I will write a review on the economical terms of an oligopolistic market. Then the detailed analysis of the situation will be presented. Finally a conclusion will be given.
The Prisoners’ Dilemma
According to an internet article (Investopedia.com) a simple definition of the Prisoners’ Dilemma is the following: „A paradox in decision analysis in which two individuals acting in their own best interest pursue a course of action that does not result in the ideal outcome. The typical prisoner’s dilemma is set up in such a way that both parties choose to protect themselves at the expense of the other participant. As a result of following a purely logical thought process to help oneself, both participants find themselves in a worse state than if they had cooperated with each other in the decision-making process.”
The well
Games of Strategy Home Assignment
Tamás Seres
Introduction 3
The Prisoners’ Dilemma 3
An Oligopolistic market: 5
The Case Study 6
Conclusion 8
References: 8
Introduction
In today’s world the Prisoners’ Dilemma is a common phenomenon in business, politics and in social life as well. This paper will analyze a real life example. It will describe the airplane manufacturing industry and their two giant manufacturers: Airbus and Boeing. The two companies find themselves in a business environment where both parties take the others decision into consideration and act in respect of those. The companies can have two choices: to cooperate with each other for higher prices or to compete at lower price to win more customers. The case study is played in a special business environment where only two companies are operating on the market. The action of one company has major effect on its competitor. Therefore it is essential for the players to analyze the decision of their competitor. Firstly I would like to present the Prisoners’ Dilemma in detail. Afterwards I will write a review on the economical terms of an oligopolistic market. Then the detailed analysis of the situation will be presented. Finally a conclusion will be given.
The Prisoners’ Dilemma
According to an internet article (Investopedia.com) a simple definition of the Prisoners’ Dilemma is the following: „A paradox in decision analysis in which two individuals acting in their own best interest pursue a course of action that does not result in the ideal outcome. The typical prisoner’s dilemma is set up in such a way that both parties choose to protect themselves at the expense of the other participant. As a result of following a purely logical thought process to help oneself, both participants find themselves in a worse state than if they had cooperated with each other in the decision-making process.”
The well
References: • Dixit, Avinash. Skeath, Susan. (2004). Games of Strategy, 2nd Edition. W. W. Norton & Company • Investopedia.com. Available at: http://www.investopedia.com/terms/p/prisoners-dilemma.asp#axzz1hAd0Dee1. [Accesed on: 19th December 2011] • Bianco, David P. Oligopoly Available at: http://www.referenceforbusiness.com/encyclopedia/Oli-Per/Oligopoly.html#b. [Accesed on: 19th December 2011] • Mehta, Foham. (2011). Bertrand’s Theory Available at: http://www.buzzle.com/articles/bertrand-competition.html. . [Accesed on: 19th December 2011]