组织的经济学与管理学(英文)ch11-Strategy-typology课件.ppt

1、Chapter 11Strategy typologyGeorge HendrikseEconomics and Management of Organisations:Co-ordination,Motivation and Strategy Topics1.Decision sequence2.Reaction function3.Response to aggressiveness4.Comparative statics5.Nature of investment6.Profit maximising investment7.Applications1.Decision sequenc

2、e in the strategy-taxonomyLSYNYNIncumbentInvestment?EntrantEntry?Incumbentp-/q-decisionEntrantp-/q-decisionEight games will be distinguished in the strategy typology Type ofinvestmentEntry?Nature of competitionProfileSPEinvestmentHardYesStrategic substitutesStrategic complementsNoStrategic substitut

3、esStrategic complementsSoftYesStrategic substitutesStrategic complementsNoStrategic substitutesStrategic complements2.Reaction functionThe reaction function is the profit maximising strategy of a firm,given the strategies of the other firms.The reaction function has a negative slope when there is qu

4、antity competitionR1q2q1The reaction function has a positive slope when there is price competitionR1p2p1Nash-equilibrium in a market with quantity competitionR2NER1q1q2Profits of firm 1 increase on R1 when the quantity produced increasesR1Increasing profits74q2q1Profits of firm 1 increase on R1 when

5、 the price increasesIncreasing profitsR164p2p13.Response to aggressivenessAn aggressive action is met by a passive response when there is quantity competitionPassive responseAggressiveactionq1R2q2An aggressive action is met by an aggressive response when there is price competitionAggressive response

6、AggressiveactionR2p1p2Comparative statics results Shift in R1 in market with q-competition p-competition MC To left To right Increase in AR To right To right 4.Comparative staticsAn investment is hard(soft)when there is a negative(positive)relationship between the investment level of the incumbent a

7、nd the profit level of the entrant.5.Nature of investmentThe investment in the first stage of the game commits the incumbent to a certain location of R1 in the third stage of the game.6.Profit maximising investmentIf entry is inevitable,then the investment choice of the incumbent has to be such that

8、 nice/passive behaviour is elicited by the entrant.A market with strategic substitutes in which entry is inevitableR1(A)R1(P)q1q20R20Subgame perfect equilibrium profile in a market with strategic substitutes when entry is inevitableEntry inevitable?Nature of competition Profile Yes Strategic substit

9、utes Aggressive Yes Strategic complements No Strategic substitutes No Strategic complements A market with strategic complements in which entry is inevitableR1(P)R1(A)P1P20R20Subgame perfect equilibrium profile in a market with strategic complements when entry is inevitableEntry inevitable?Nature of

10、competition Profile Yes Strategic substitutes Yes Strategic complements Passive No Strategic substitutes No Strategic complements If entry can be deterred,then the incumbent has to invest in an aggressive profile in order to make the market unattractive for the entrant.A market with strategic substi

11、tutes in which entry can be deterredR1(A)R1(P)q1q20R20Subgame perfect equilibrium profile in a market with strategic substitutes when entry can be deterredEntry inevitable?Nature of competition Profile Yes Strategic substitutes Yes Strategic complements No Strategic substitutes Aggressive No Strateg

12、ic complements A market with strategic complements in which entry can be deterredR1(P)R1(A)P1P20R20Subgame perfect equilibrium profile in a market with strategic complements when entry can be deterredEntry inevitable?Nature of competition Profile Yes Strategic substitutes Yes Strategic complements N

13、o Strategic substitutes No Strategic complements Aggressive The nature of investment determines whether the desired profile of the incumbent is established by a L(ow)or H(igh)level of investment.Subgame perfect equilibrium investment strategies for both types of investmentType ofinvestmentEntry?Natu

14、re of competitionProfileSPEinvestmentHardYesStrategic substitutesStrategic complementsNoStrategic substitutesStrategic complementsSoftYesStrategic substitutesStrategic complementsNoStrategic substitutesStrategic complementsAgressiveAgressiveAgressiveAgressiveAgressiveAgressivePassivePassiveHLHHLHLLS

15、trategy typology Type ofinvestmentEntry?Nature of competitionProfileSPEinvestmentHardYesStrategic substitutesStrategic complementsNoStrategic substitutesStrategic complementsSoftYesStrategic substitutesStrategic complementsNoStrategic substitutesStrategic complementsAggressiveAggressiveAggressiveAgg

16、ressiveAggressiveAggressivePassivePassiveTop DogPuppy DogTop DogTop DogLean&HungryFat CatLean&HungryLean&HungryMarket share maximisation as profit maximising strategyCCWCWYNPCMNYFirmEntrantManager 0-2 0 4 3 1 8 0 2-2-2 2 4 3 1 8 0 2Payoff firmPayoff entrantPayoff managerIncentivescheme?Entry?Competi

17、tivescenario?Applications Strategic delegation RoyaltiesStrategic delegationCan it be a profit maximising strategy to pay your manager according to sales instead of profits?It depends upon:The entry condition,i.e.whether entry is inevitable or not,i.e.the location of the 0 The nature of competition,

18、i.e.the slope of the reaction function0482-2 3040 1-2-2 231802PMYNYNWCCWCCExampleFirmPayment?EntrantEntry?ManagerPrice war?0482-2 3040 1-2-2 231802PMYNYNWCCWCCFirmPayment?EntrantEntry?ManagerPrice war?SPE Firm:M Entrant:(Y,N)Manager:(C,C,W,C)How do you represent this with reaction functions?You have

19、 to choose one out of two possibilities.The investment will be defined before these possibilities are presented and the answer is formulated.InvestmentExtent of profit based salary of the manager.Low level of investment:salary of the manager is based on market share.High level of investment:salary o

20、f the manager is based on profits.Soft investmentThe manager will not fight entry,because a price war will be at the expense of firm profits,and therefore his salary.This is nice for the entrant.Case 1 Suppose the market is characterised by:strategic complements.Entry is inevitable.R2R1(?)R1(?)P10P2

21、R2R1(H)R1(L)P10P2SPE strategy?Fat Cat strategy of overinvestment,i.e.profit based salary of the manager,in order to create a passive profile,which will be met by the entrant with a passive response,i.e.high prices.Case 2Suppose the market is characterised by:strategic complementsEntry is not inevita

22、ble.R2R1(H)R1(L)P1P20SPE strategy?Lean and Hungry strategy of underinvestment,i.e.a market share based salary of the manager,in order to create an aggressive profile,which will be responded to by the potential entrant by staying out of the industry.ConclusionThe strategic delegation example presente

23、d in the extensive form corresponds with case 2.Royalties(versus licenses)An inventor wants to sell his innovation to an established firm for as much money as possible.Do you advise the inventor to use a royalty scheme?InvestmentExtent of royaltiesLow level of investment:LicenseHigh level of investm

24、ent:Royalty.What is the strategic difference between a license and a royalty?A license entails a fixed payment in advance for the use of the innovation,i.e.it is a sunk cost in the competition stage of the game.A royalty entails a payment for each unit(produced with the innovation)sold.It boils down

25、 to higher marginal costs in the competition stage of the game.Suppose the market is characterised by:strategic substitutesEntry is inevitable.Soft investmentR2R1(?)R1(?)q1q20R2R1(L)R1(H)q1q20SPE strategy?Lean and hungry strategy of underinvestment in royalties,i.e.a license,in order to create an aggressive profile.The entrant will respond in a passive way.This implies a high profit for the incumbent firm.ConclusionYou advise the inventor to use a license.