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The text says that one of the principles of game theory is that:
“If a strategy exists that allows a competitor to dominate us, then our priority is to eliminate that strategy.”
I looked it up on Google but still couldn’t understand this.
Shouldn’t we take up that strategy in order to dominate that competitor. What do they mean by eliminate that strategy.
If their strategy dominates us, eliminating that strategy will stop that domination. Domination of the competitor is not necessarily possible.
So is it correct that eliminating that strategy means implementing a better strategy than the competitor or matching up to the competitor.
But how is this question applied to the prisoner’s dilema.
The prisoner’s dilemma is when two parties, acting in their own self-interests, do not produce the optimal outcome. Parties choose to protect themselves at the expense of the other participants. As a result, both participants find themselves in a worse state than if they had cooperated with each other in the decision-making process.
For example, say that a number of companies are competing and have agreed to form a cartel, fixing the selling price of their identical product. Let’s say at $100/unit. They all do reasonably well.
However, one party breaks ranks and sells at $80. Customers will flock to that seller, whose volume will increase and who can look forward to higher profits. The party who dropped the price was trying to eliminate the cooperative, price-fixing strategy.
Other suppliers see this and also reduce their prices to $80.
They all end up doing worse than if they had cooperated and kept selling at $100.
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Thx for info
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