Section I—SIC and NAICS Codes
The Standard Industrial Classification (SIC) is a system for classifying industries by a four digit code. The Security and Exchange Commission (SEC) uses SIC codes when sorting company filings. Companies that operate in a certain industry use a specific SIC code when filing with the SEC so that the type of business is properly identified. Identifying government contracts by their SIC description. The SIC system arrays the economy into 11 divisions, that are divided into 83 2-digit major groups, that are further subdivided into 416 3-digit industry groups, and finally disaggregated into 1,005 4-digit industries. While certain governmental departments and agencies, such as the SEC, still use the SIC, it is being replaced by the six-digit North American Industry Classification System (NAICS code). The NAICS is a 2- through 6-digit hierarchical classification system, offering five levels of detail. Each digit in the code is part of a series of progressively narrower categories, and the more digits in the code signify greater classification detail. The first two digits designate the economic sector, the third digit designates the subsector, the fourth digit designates the industry group, the fifth digit designates the NAICS industry, and the sixth digit designates the national industry.
Section II—Game Theory and Hypothesis 2a
In the set-up to Hypothesis 2a, the authors discuss the notion that players learn from past experiences and have a perfect memory. They discuss a “tit-for-tat” strategy that should over time result in an attenuation of the competitive moves between players. This interaction over time should make it easier for a firm to predict the direction and nature of their rival’s next (competitive) move. The authors suggest in Hypothesis 2a that the volatility of the relationship between Coke and Pepsi’s competitive moves would attenuate over time. However, they also discuss how it can be argued that firms will engage in...
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