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Game Theory by Mark L. Burkey

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Chapter 8

Corporate Games I

Games Against Your Customers

In this chapter, we will focus on the ways buyers and sellers can use ­information as a tool to help them make better decisions. Though important, we are not going to discuss semantic marketing tactics here (the term “Green Product” might be better than “Environmentally Friendly,” for example…), or simple innumeracy of consumers (e.g., a one-third price discount is better than one-third more product free, but most ­customers do not know this). We are talking about how the use of information affects the actions and reactions in relationships between customers and businesses.

8.1 Adverse Selection

Businesses normally want customers who pay their bills and do not cause any trouble. In this ...

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