Game Theory Applied Research In Business Competition

Game theory is such a theory as study how a rational decision-maker makes his decision under the condition of all parts' strategies interacting against each other. Its applying fields cover economics, politics, military science, diplomacy, and even criminology etc. It solves the contradiction between the individual rationality and that of collective by putting the contradiction of the collective rationality on the basis of that of the individual. The traditional economic and managerial theories' attention is to discuss how to maximize a single business 'profit with the subjection of resource, while game theory especially emphasizes the forming of profit equilibrium when no competing part would like to change his own strategies one-sided in the modem marketing competition. This is not only the change of analyzing tools and techniques, but also the fundamental change of the mentality in fact.A formal model that analyzes the conflicts and cooperation between different businesses will be adopted in this thesis. The competition between different businesses is regarded as a strategic game or a business action's battle plan, and in such a game, each business competes for the profit. In this thesis, we'll discuss how businesses make their strategies, and how these strategies decide profit; also the traditional competition game is improved here to analyze each business' strategies and action better.Chapter One Introduction. It introduces the development of game theory, the relationship between economics and game theory and analyze the new characters of modem competition, as well as the reason why we adopt game theory as an analyzing tool. In the end, we outline the main content of this thesis.Chapter Two Basic theory of game theory. It aims to introduce game theory 's definition, key elements, classification and the definition of equilibrium solution as well.Chapter Three Competition game model. It turns to introduce some classic competition game model, in which the Coumot game model is the studying basis of the last two chapters.Chapter Four Monopoly size structure and gains model. By applying the basic theory of dynamic game on the basis of normal form of Coumot game, we divide business competition into two stages: in stage I, the businesses choose their technical level and we get a combination of technical levels; in stage 2,the businesses choose their own output (stage 2 can also be called as supply game). Then we can get the relationship between business' monopoly size and gains.Chapter Five The development and application of competition game model. In section 1, the overall cost leading strategy competing model and the market leading strategy competing model will be introduced on the basis of Cournot normal form game. In section 2 ,the advertisement game model as a main side of non-price competition is introduced ,which analyzes the relation between advertisement competition and market dominance ; how businesses choose proper advertisement method for propaganda, with some helpful suggestions given.