If each country acts rationally to maximize its welfare. If the U.S. will behave irrationally

1. CHAPTER 13
QUESTION 2
Game Theory & Competitive Strategy

3. US JP Dilemma
US – (Open, Open) (Open, Close)
Japan – (Open, Open) (Open, Close)
Dominant Strategy – US is Open
– Japan is Open
Nash Equilibrium – (Open, Open)
If each country acts rationally to
maximize its welfare.

4. US JP Dilemma
• If the U.S. wants to penalize Japan, they
will choose to Close their import markets.
• Japan’s strategy will not be affected since
choosing to Open remains Japan’s
dominant strategy.
• Nash Equilibrium – (Close, Open)
If the U.S. will behave irrationally

5. THANK YOU!