The document discusses how online retailers rapidly change prices in response to competitors in an effort to undercut each other. It describes how Amazon dropped and raised the price of a video game seven times over seven days around Thanksgiving in response to the prices at Walmart, Target, and Best Buy. This new era of speed and precision in online price wars creates a confusing landscape for shoppers, as prices can leap and plummet on short notice. Retailers now use computer programs to monitor competitors' prices and automatically adjust their own prices within hours or even minutes.

1. SOCIAL COGNITIVE THEORY EVALUATION SCORING
GUIDE
SOCIAL COGNITIVE THEORY EVALUATION SCORING
GUIDE GRADING RUBRIC
Criteria
Summarize the major aspects of social cognitive theory.
Non performance
Fails to summarize the major aspects of social cognitive theory.
Basic
Partially summarizes the major aspects of social cognitive
theory.
Proficient
Summarizes the major aspects of social cognitive theory.
Distinguished
Thoroughly summarizes the major aspects of social cognitive
theory.
Criteria
Analyze the strengths and weaknesses of social cognitive
theory.
Non performance
Fails to analyze the strengths and weaknesses of social
cognitive theory.
Basic
Partially analyzes the strengths and weaknesses of social
cognitive theory.
Proficient
Analyzes the strengths and weaknesses of social cognitive
theory.
Distinguished
Thoroughly analyzes the strengths and weaknesses of social
cognitive theory.
Criteria
Apply social cognitive theory to a practical situation; describe

2. the situation, how the theory can be applied, and what the
expected outcomes would be.
Non performance
Fails to apply social cognitive theory to a practical situation.
Basic
Partially applies social cognitive theory to a practical situation;
partially describing the situation, how the theory can be
applied, and what the expected outcomes would be.
Proficient
Applies social cognitive theory to a practical situation;
describing the situation, how the theory can be applied, and
what the expected outcomes would be.
Distinguished
Thoroughly applies social cognitive theory to a practical
situation; thoroughly describing the situation, how the theory
can be applied, and what the expected outcomes would be.
Criteria
Describe the relationship between social cognitive theory,
motivation, and self-efficacy.
Non performance
Fails to describe the relationship between social cognitive
theory, motivation, and self-efficacy.
Basic
Partially describes the relationship between social cognitive
theory, motivation, and self-efficacy.
Proficient
Describes the relationship between social cognitive theory,
motivation, and self-efficacy.
Distinguished
Thoroughly describes the relationship between social cognitive
theory, motivation, and self-efficacy.
Criteria
Compare behaviorism to social cognitive theory.
Non performance
Fails to compare behaviorism to social cognitive theory.
Basic

3. Partially compares behaviorism to social cognitive theory.
Proficient
Compares behaviorism to social cognitive theory.
Distinguished
Thoroughly compares behaviorism to social cognitive theory.
Criteria
Write in a concise, balanced, and logically organized manner.
Non performance
Fails to write in a concise, balanced, and logically organized
manner.
Basic
Writes in a fairly concise, balanced, and logically organized
manner.
Proficient
Writes in a concise, balanced, and logically organized manner.
Distinguished
Writes in a very concise, balanced, and logically organized
manner.
Criteria
Use grammar, punctuation, and mechanics expected of graduate-
level composition, including APA style and formatting for all
citations and references.
Non performance
Fails to use grammar, punctuation, or mechanics expected of
graduate-level composition, including APA style and formatting
for all citations and references.
Basic
Uses some grammar, punctuation, and mechanics expected of
graduate-level composition, including APA style and formatting
for all citations and references.
Proficient
Uses grammar, punctuation, and mechanics expected of
graduate-level composition, including APA style and formatting
for all citations and references.

4. Distinguished
Uses exceptional grammar, punctuation, and mechanics
expected of graduate-level composition, including APA style
and formatting for all citations and references.
***AIM FOR DISTINGUSHED***
Chapter 15:
Strategic Games
Ordering Information:
Betty Jung
Marketing Specialist, Finance/Economics/Decision Sciences
South-Western | Cengage Learning
5191 Natorp Boulevard, Mason, OH 45040
The ISBN for your 2e book alone is: 1439077983
The Bundle ISBN for your 2e book + the printed access card for
MBA Primer is: 0538771240
Summary of main points
A Nash equilibrium is a pair of strategies, one for each player,
in which each strategy is a best response against the other.
When players act rationally, optimally, and in their own self-
interest, it’s possible to compute the likely outcomes
(equilibria) of games. By studying games, we learn not only

5. where our strategies are likely to take us, but also how to
modify the rules of the game to our own advantage.
Equilibria of sequential games, where players take turns
moving, are influenced by who moves first (a potential first-
mover advantage, or disadvantage), and who can commit to a
future course of action. Credible commitments are difficult to
make because they require that players threaten to act in an
unprintable way—against their self-interest.
In simultaneous-move games, players move at the same time.
*
Summary of main points
In the prisoners’ dilemma, convict and cooperation are in
tension—self-interest leads to outcomes that reduce both
players’ payoffs. Cooperation can improve both players’
payoffs.
In a repeated prisoners’ dilemma, it is easier for players to learn
to cooperate. Here are some general rules of thumb:
Be nice: No first strikes.
Be easily provoked: Respond immediately to rivals.
Be forgiving: Don’t try to punish competitors too much.
Don’t be envious: Focus on your own slice of the port pie, not
on your competitor’s.
Be clear: Make sure your competitors can easily interpret your
actions.
Sequential‫يلسلست‬ -move games
In game theory, there are two types of games. The first of which
is known as sequential-move games.

6. For a sequential-move game, players take turns.
Each competitor is given the opportunity to evaluate their
.deecorp ot woh gnitceles erofeb evom s’lavir‫س‬ ‫ناف‬ ‫م‬
To analyze sequential games, use the “extensive ‫لماش‬ -” or
“tree-form” of a game, and look ahead and reason back.
For example, a two-move, two-player game. Player One
(moving first) must anticipate ‫عقوت‬ the reaction of Player Two
to each of One’s possible moves to determine One’s best move
Equilibrium is when each player chooses a best available move,
anti ci pating how the other will react.
Nash Equilibria
Named for John Nash, mathematician and Nobel laureate in
economics.
Nash is known as the "father" of non-cooperative game theory
He proved the existence of equilibrium in all well-defined
games in his doctoral dissertation at Princeton.
Definition
A set of strategies, one for each player, such that no player has
incentive to ‫نم‬ ‫بناج‬ ‫دحاو‬ unilaterally change her action.
Players are in an equilibrium if a change in strategies by any
one of them would lead that player to earn less than if she
remained with her current strategy.
Entry “game”
Suppose a potential ‫لمحتم‬ entrant ‫كراشم‬ is deciding whether to
enter an industry in competition with an incumbent ‫ةيلاحلا‬
firm/monopoly. ‫راكتحالا‬
If the entrant decides to enter the industry, the incumbent has
two paths of action:
Accommodate the entry; or
Fight the entry.

7. By modeling the situation using game theory, we find that
accommodating ‫باعيتسا‬ an entrant leads to profits while
fighting an entrant leads to losses.
Modeling entry decision
*
Modeling entry decision (cont.)
To find the best strategy in a sequential game put two lines
through the paths that present suboptimal choices.
In this game, equilibrium is {In, Acc}:
Deterring ‫عدر‬ ‫وا‬ ‫عنم‬ Entry
Part of game theory is figuring out how to change the game to
your own advantage.
In the current game, if the incumbent firm can deter entry, it
would earn $10 profit, instead of only $5.
One way of deterring entry is to threaten (in such a manner as to
be truly believable) to “commit” to fight the entry and price
low.
To model this commitment, take away one of the incumbent’s
options, the ability to accommodate entry.
By committing to fight entry, the incumbent can benefit.
Expansion, Advertising, Pricing.

8. Types of games: Simultaneous ‫ةنمازتم‬ -move
The second type of game is simultaneous-move. In this type of
game players move simultaneously.
This does not literally require players moving at same time, just
that each player plans a move without knowing the other
player’s move in advance
To analyze a simultaneous-move game we use a matrix or
“reduced-form” of the game.
Again the likely outcomes are Nash equlibria, where no player
has an incentive to change, i.e., each player is doing the best
they can.
Simultaneous-move games (cont.)
In a two-player game, each player’s payoffs can be modeled in a
table/matrix by assigning player One to choose row strategies
and player Two to choose column strategies.
If player one’s strategy payoffs are in rows 1,2,3,4,5 and player
two’s strategy payoffs are in columns A,B,C,D,E then the actual
payoff can be found by locating the cell in which the two
strategy decisions (row, column) meet.
Compute Nash Equilibrium by finding pairs of strategies where
both players are choosing the best possible response to their
competitor’s strategy
Modeling simultaneous-move games
Analyzing simultaneous-move games
For player one:
For each of player Two’s strategies (each column), select the
row (underline it) that maximizes One’s profits.

9. For example if Two plays column A, One would do best to use
strategy 1, which earns a nine dollar payoff. For each column
underline player one’s best response.
For player two:
Examine each of player One’s strategies (each row) and select
the column strategy that maximizes player Two’s profits
For example on row 4, player Two would be indifferent between
A,B,D, and E because each earns a $9 payoff. Underline all four
best responses.
To find the game equilibria, locate the cell (or cells) in which
both numbers have been underlined—these are best responses to
each other.
Finding equlibria
This game has three equilbria, where each player is responding
optimally to their rival, i.e., neither player has incentive to
change strategy
The prisoners’ dilemma game
The police suspect that Frank and Jesse robbed a bank, but they
have no direct evidence. They picked them up in their car, a
parole violation which carries a sentence of two years. The US
attorney offers both the same deal:
If only one confesses, the one who confesses goes free, while
the other one receives ten years in jail.
If they both confess, each receives five years in jail.
If neither confesses, they both serve two years for violating
parole.
Why the PD is interesting

10. The only equilibrium is for both to confess and serve five years
But BOTH would be better off if neither confessed
By following self interest, the players thus make the group
worse off
The tension between conflict (self interest) and cooperation
(group interest) is inherent in the prisoners’ dilemma game.
If the players/prisoners could cooperate, they make themselves
better off.
Prosecutors separate defendants for precisely this reason, i.e., to
make cooperation more difficult.
The Prisoners’ Dilemma in business
A pricing dilemma frequently faced by businesses selling
substitute products has the same logical structure as the
prisoners’ dilemma (In the book as well as the table below from
the book, the bottom right cell should have payoffs (2,2) and
NOT (2,-2))
Two competing firms would both be better off if they could
price high and get payoffs (2,2)
BUT that outcome is not an equilibrium, the equilibrium is (0,0)
– try and reason why – its similar to the previous example
If the competing firms could “coordinate” pricing, they would
make themselves better off - BUT that is illegal
Don’t break the antitrust laws
Advice from an antitrust prosecutor:
Do not discuss prices with your competitors. That is one of
those “black-and-white,” areas. The enforcement authorities can
be counted on to bring a criminal prosecution if they learn that
you have met with you competitors to fix prices or any other
terms of sale. Jail time is increasingly common.
Other illegal solutions to the prisoners’ dilemma are to allocate

11. customers, rig bids, or agree not to compete in each other’s
areas. Again the advice is:
Do not agree with your competitor to stay out of each other’s
markets. It may be tempting to seek freedom of action in one
part of the country by agreeing with a competitor not to go west
if he will not come east. Avoid that temptation. The
consequences of the discovery of such behavior by the
enforcement authorities are likely to be the same as the
unearthing of a price-fixing conspiracy.
A (potentially) legal solution
One way to break the prisoners’ dilemma pricing (low, low) is
for the two competing firms to merge.
HOWEVER, if the only incentive to merge is to eliminate
competition, the merger may violate antitrust laws.
The Clayton Act outlaws any merger that substantially lessens
competition, and a merger to get firms out of a prisoners’
dilemma could be viewed as anticompetitive.
Rule of thumb: Your merger is not likely to be challenged by
the competition agencies if (i) there is a pro-competitive
justification for it; (ii) if it is not likely to result in higher
prices; and (iii) if customers are not complaining about its
anticompetitive effects
Advertising dilemma
In advertising too, there is a dilemma firms face that can be
modeled after the prisoners’ dilemma.
For these two cigarette companies, both could make more
money by not advertising, BUT given the share-stealing nature
of the advertisements (structured to steal market share from
rivals rather than increase demand) the {don’t advertise, don’t
advertise} cell is not an equilibrium – either firm does better by

12. advertising
Same structure as prisoner’s dilemma
The game of chicken
The classic game of “chicken” has two equilibria:
Dean can make himself better off by committing to going
straight (which changes a simultaneous-move game into a
sequential move game with a first-mover advantage).
Coordination is REALLY important in this game.
Game of Chicken (cont.)
By committing to going straight, Dean exploits the inherent
first-mover advantage. If James moves first and selects
“straight,” Dean is forced to swerve.
But convincing your competitor that you have committed to a
position can be difficult
Do you have to hit him to convince him you are going straight?
INSERT GRAPHIC
*
The game of chicken in business
In 2000, a company (A) was deciding between Italy and South

13. Africa as locations for which to develop a new strain of hybrid
grapes.
The Italian market was bigger so A preferred Italy as a growing
site, but A’s only competitor (B) was facing the same choice for
the same strain of grapes.
Both would prefer to be the sole entrant, and both would prefer
Italy to South Africa.
This is essentially a game of chicken.
Growing grapes (cont.)
If A can find a way to move first and go into Italy, B will
choose S. Africa
Shirking/Monitoring Game
How to manage workers can be seen as a game between the
employer and employee.
This game has no equilibrium in “pure strategies”f
Instead, players randomly choose actions, called “mixing”
Idea is to keep your opponent guessing
The employer could combine random monitoring with an
incentive based compensation scheme – such as rewarding the
employee with a bonus when/if the employer finds her hard at
work.
Or if found shirking, the employer could dismiss, demote or
fine the employee

14. November 30, 2012
Retail Frenzy: Prices on the Web Change
Hourly
By STEPHANIE CLIFFORD
The day before Thanksgiving, Amazon was offering a
discounted price of $49.96 on a popular
Xbox game, the same price as Walmart and 3 cents lower than
Target.
Then the holiday pricing shuffle began.
Amazon dropped its price on the game, Dance Central 3, to
$24.99 on Thanksgiving Day, matching
Best Buy’s “doorbuster” special, and went to $15 once Walmart
stores offered the game at that
lower price. Amazon then brought the price up, down, down
again, up and up again — in all, seven
price changes in seven days.
The unluckiest buyer paid more than triple the price that the
luckiest buyer paid.
Retail price wars online have entered a new era of speed and
precision, creating a confusing
landscape for shoppers in which prices leap and plummet on
short notice. In the old days,
merchants sent employees into competitors’ stores to check on

15. pricing, and days later “sale” signs
reflected new markdowns. Now, sophisticated computer
programs accomplish the same goal
online within hours, and even minutes.
The battle was fierce over the holiday weekend. At the request
of The New York Times, the pricing
firm Dynamite Data tracked prices at three major online
retailers — Walmart.com, Amazon.com
and Target.com — starting the week before Thanksgiving and
going through Tuesday, after most
heavy promotions ended.
The data shows that retailers paid close attention to
competitors’ online prices and in-store
specials, battling to undercut one another by as little as 2 cents
and forcing each other into
out-of-stock positions as they pushed prices down. Retailers
fight to have the lowest prices to
increase sales volume, aid in search-result prominence and help
burnish a thrifty reputation.
“There was definitely some gamesmanship going on,” said
Diana Schulz, chief executive of
Dynamite Data, which tracks online retail pricing, stock status,
ratings and other information for

16. clients like Samsung and Abt Electronics.
While Amazon has long tinkered with prices, its competitors are
now fighting back. In the last year,
Walmart invested heavily in pricing tools, a Walmart
eCommerce spokesman, Dan Toporek, said.
Dynamite Data said there had been a marked increase in how
much Walmart played with prices,
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and smaller retailers, including GameStop, Best Buy and Toys
“R” Us, were now also adjusting
some prices at least daily.
The goal is to attract shoppers with competitively priced
products that show up on Web searches,
but there is risk, too: some consumers tire of price whiplash.
“People are starting to realize, ‘I can’t trust the price I’m
getting, because it might change,’ ” a
pricing consultant, Rafi Mohammed, said. Shoppers have few
ways to gain an advantage —

17. ordering the same product at different prices requires expensive
return shipments — but Mr.
Mohammed said retailers had an opportunity to soothe
consumers by offering refunds for price
adjustments.
The parrying could be seen with a Nintendo game, Mario Kart
DS.
A week before Thanksgiving, the retailers’ prices varied, with
Amazon selling it at $29.17, Walmart
at $40.88, and Target at $33.99, according to Dynamite Data.
Through Thanksgiving, as Target
kept the price stable, Walmart changed prices six times, and
Amazon five. On Thanksgiving itself,
Walmart marked down the price to its advertised $29.96, which
Amazon matched.
Ms. Schulz said sophisticated retailers set algorithms to change
prices in response to competitors.
“Retailers pipe a bunch of information in electronically, like
internal information — cost,
availability of inventory, sales goals,” along with competitors’
prices, she said.
The software also lets retailers establish rules on the pricing of
certain products: always price
Furbys 5 percent below Kmart, for example, or make sure some

18. goods are priced at an average of
Amazon’s and Walmart’s prices. Generally, pricing managers
also manually adjust prices.
Mr. Toporek said Walmart.com used a combination of computer
tools and human adjustments. On
popular items, like Walmart’s best sellers, the site tries to
“maintain low prices on the items people
want the most,” meaning it usually responds to competitors’
price changes.
Mr. Toporek said, however, that the site also tried not to jostle
shoppers.
“Clearly we are making changes, but it’s not the kind of
constant change you’re seeing on some
other sites,” he said. An Amazon spokeswoman, Pia Arthur,
declined to offer details on Amazon’s
pricing strategy, and said in an e-mail that the company was
“working hard to meet or beat the
lowest prices out there.” Target declined to comment.
A retailer can increase its sales volume when it has the lowest
prices, especially because it will
appear prominently in price comparison tools. For the children’s
tablet LeapPad1 Explorer, for
instance, Walmart appeared to be purposely undercutting
Amazon, even if by a matter of pennies.

19. When Amazon offered the tablet for $59.99 on the Monday
before Thanksgiving, Walmart priced
it at $59.97. On the Sunday after Thanksgiving, Amazon raised
the price to $69.99, and Walmart
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followed, going to $69.97.
Sometimes a retailer cuts prices to tempt a competitor into
offering a money-losing price and
depleting its inventory. “They’ll wait until their competitor has
sold out, and jump back into the
game when the prices rise a little bit,” said Ms. Schulz of
Dynamite Data.
While Target did not appear to shift prices nearly as frequently
as Walmart and Amazon, it offered
specials that spurred competitors into action. For a game called
Telestrations, Walmart kept its
price at $24.99 for the week. Amazon tried different prices,
from $23.24 to $26.39, in the week

20. before Thanksgiving, while Target held steady at $24.99. But
when Target lowered the price to $18
on Black Friday, Amazon matched it.
Decide.com, which offers consumers a tool suggesting when to
buy, said that the retailers with the
most volatile pricing included Buy.com, Amazon, Walmart,
Best Buy and Sears. The most volatile
product categories include games and consoles, printers,
headphones, cameras, TVs and
refrigerators.
Dynamite Data also found that while many Amazon promotions
over the weekend were at or near
the lowest prices of the year, some were not that great — even
compared to Amazon itself.
A Bodum wok, for instance, was priced at $119.95 before
Thanksgiving, and Amazon offered a
so-called lightning deal on Black Friday for $94.99. That
seemed like a huge discount — except
that the same wok sold on Amazon for $59.99 just a few months
ago.
Some promoted discounts at Amazon, moreover, appeared
steeper because the base price was
increased before the Thanksgiving week markdown, Dynamite
Data said. A Hewlett-Packard Envy

21. notebook that cost $1,099.99 on Nov. 10, for example, was
marked up to $1,179.97 by Nov. 20.
That day, Amazon offered a limited-time deal at $849.99, a 28
percent discount from the
marked-up price, but only 23 percent less than the Nov. 10
price.
Consumers seemed good at evaluating deals, though. Later that
week, Amazon offered another
deal on that Envy computer, at $1,049.99. According to
Dynamite Data, the sell-through rate was
much slower than at $849.99. “Consumers are becoming more
savvy shoppers,” Ms. Schulz said.
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This is the second chapter of your cumulative paper on the four
major learning theories in the psychology field. For this
chapter, you will focus on social cognitive learning theory.
Social cognitive theory assumes learning can take place
vicariously and without reinforcement. However, feedback is
important to students. Motivation will obviously produce better
learning. There are other critical, personal variables, such as
self-efficacy, goal orientation, outcome expectations, and self-

22. regulation that will facilitate learning.
For this paper, you are asked to examine specific aspects of
social cognitive theory and compare it to behaviorism. Your
paper should be four to five pages in length, not counting your
title page or references. Be sure to use examples from your
readings and research to support your position throughout your
paper. Papers should be double-spaced with a font size of 12
and follow APA style. Address the following in your paper:
· Summarize the major aspects of social cognitive theory.
· Analyze the strengths and weaknesses of social cognitive
theory, in general.
· Apply social cognitive theory to a practical situation in your
specialization. Describe the situation, how the theory can be
applied, and what the expected outcomes would be.
· Describe the relationship between social cognitive theory,
motivation, and self-efficacy.
· Compare behaviorism to social cognitive theory.
· Write in a concise, balanced, and logically organized manner.
· Use grammar, punctuation, and mechanics expected of
graduate-level composition, using the accepted form and style
of the profession, including APA cited support and format.
Paper Requirements
· Number of References: A paper of this length should include
references. As a graduate student, you are responsible for
determining the appropriate number of resources. The majority
of them should be original research articles published in
legitimate scientific journals. A few review or survey articles
are also acceptable.
· Article Distinctions: Research articles present original
research, review articles discuss research already presented
elsewhere, and survey articles are comprehensive review
articles that discuss an entire field or area of research. If these
distinctions are unclear to you, investigate them using the
resources in the Writing Feedback Tool or ask your instructor
for help. References to books are acceptable, but they should be
kept to a minimum—probably no more than five.

23. · APA Style: You must use proper APA style to cite and list
your references. Refer to the Capella Online Writing Center's
APA Style and Formatting guidelines for more information.
· Format: Use the following structure to organize your paper:
· Cover page (your name, your specialization or program, title
and course number, current quarter and year, instructor's name).
· Optional: Abstract.
· Body of paper, including headings and subheadings over the
appropriate content.
· Reference list.
· Refer to the APA Style and Formatting guidelines for
additional formatting information.
· Style: Write in the third person as an impartial narrator. Avoid
the use of I, we, or you. In particular, avoid phrases like "I
think" in favor of phrases like "the evidence suggests" or
"research indicates." In science, personal opinion carries no
weight unless it is supported by a combination of empirical
research and statistical or logical-mathematical inference.
· Other Notes: Avoid long quoted passages from your source
texts. Your paper should be a synthesis of your own ideas, in
your own words—even if your ideas refer to the original ideas
of others, in which case the references should be explicit. A
paper at the graduate level should be scholarly and more than a
mere summary. It should present a unique thesis or at least a
significant point that you are trying to make, adding appreciably
to what is already known of your topic. Your point or thesis will
stand or fall solely on its strength—that is, the quality and
quantity of the evidence that you present.
Review the Social Cognitive Theory Evaluation Scoring Guide
for the grading criteria of this assignment. You can use the
resources available with this assignment to help you with your
writing, including Smarthinking, the free tutorial, and writing
review service. You can use Smarthinking to get feedback on
your writing before submitting it to your instructor for a grade.
Submit your assignment in the assignment area.