Economic game theory can be a tedious and difficult concept, but it doesn’t have to be. This exercise allows students to learn about game theory via an entertaining medium – video games. After considering a pricing war between two video game giants, Microsoft and Sony, students are asked to calculate pricing strategies based off game theory predictions. Students must use a 2-by-2 simultaneous one-shot game (like the Prisoner’s Dilemma framework) to determine if one or both companies will cut prices.
Pricing Games: Sony PlayStation and Microsoft Xbox
Core Disciplines: Economics
Click on any button below to view the available document.
Make sure you are registered and/or logged in to our site to view product documents. Once registered & approved, faculty, staff, & course aggregators will have access to full inspection copies and teaching notes for any of our materials.
If you need to make copies, you MUST purchase the corresponding number of permissions, and you must own a single copy of the product.
Electronic Downloads are available immediately after purchase. "Quantity" reflects the number of copies you intend to use. Unauthorized distribution of these files is prohibited pursuant to term of use of this website.
This product has a teaching note available. Available only to Registered Educators. Please login to view it.
After reading and discussing the material, students should:
- Apply the Prisoners' Dilemma game to the context of pricing
- Ascertain which costs are relevant for game analysis and determine appropriate payoffs
- Apply a variety of other basic microeconomic concepts, including own-price elasticity of demand and the relationship between price elasticity and short-run monopoly profit maximization.