Asymmetric Coordination Game

Topics: Game theory, Nash equilibrium, Coordination game Pages: 2 (492 words) Published: September 26, 2011
Journal Assignment #2 – Asymmetric Coordination Game
This game is an asymmetric coordination game. Asymmetric coordination occurs when players cannot agree on a ranking of the possible coordination outcomes. There may be one outcome where one player disproportionately wins benefits but the other player disproportionately loses. In this game, there are two pure strategy Nash equilibrium, (2,1) and (1,2). Thus, Firm 1 prefers the equilibrium (2,1) more than any other strategy profile and Firm 2 prefers (1,2) to all others. | | Firm 2|

| | Beta| VHS|
Firm 1| Beta| (2, 1)| (0, 0)|
| VHS| (0, 0)| (1, 2)|

The source of conflict could be described as below: every player preferred one equilibrium over the other, but both would rather be at either equilibrium than to be mal-coordinated or uncoordinated. When games exhibit multiple equilibriums, which one will be played? The precondition of being able to successfully coordinate with a player is to accurately forecast his opponents’ selections. The player must estimate not only what his opponents are likely to do, but also how his opponents respond to their beliefs about his ability to identify coordinating points and anticipate their play. The players can make a criterion such as a focal point to solve this problem. Focal points are important concepts in coordination games. It relies on one individual’s understanding on the environment and the game itself. In this case, we suggest comparing the cost of these two choices. The one with lower cost and proliferation should be chosen. Because in the business world, the smart money observes how this shakes out for a while and how things firm up. In fact, the technical differences between VHS and Beta were small, but to users, VHS’s significantly large market share and low cost were more important than Beta’s advantages in editing and special effects. The intervention of the third party, like the government or the industry association, is another way...
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