What are the game conditions that would persuade a player to use capacity as a credible threat in a game?
Purpose of the Assignment:
To understand the relevance of capacity in a game and to understand the economics of costs, and in particular to identify
the 5 Steps in obtaining cost leadership in an industry – from the perspective of managing production plants in terms of
minimising costs and avoiding the capacity constraint.
The Assignment Question:
What are the game conditions that would persuade a player to use capacity as a credible threat in a game?
Approach: You may use your own company, or a company that you are familiar with or a hypothetical case. Look at the 5
steps template at page 61 in Patrick A. McNutt �Decoding Strategy� Pattern & Predictions, 2nd Edition – ISBN:
978-1-259-07106-5, and the related discussion in Unit 2 of the colour-coded Storybook (will upload)
Hint: Read Chapter 2 in Besanko (Economics of Strategy, 6th Edition, International Student version, David Besanko, David
Dernove, Mark Shanley, Scott Schaefer, ISBN: 978-1-118-31918-5) and Chapter 5 in McNutt.
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