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The relationship between mixed strategies and strategic groups
Author(s) -
Kumar K. Ravi
Publication year - 1987
Publication title -
managerial and decision economics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.288
H-Index - 51
eISSN - 1099-1468
pISSN - 0143-6570
DOI - 10.1002/mde.4090080310
Subject(s) - nash equilibrium , strategy , microeconomics , strategic interaction , mathematical economics , economics , solution concept , game theory , basis (linear algebra) , industrial organization , business , mathematics , geometry
This paper identifies a theoretical basis for the existence of strategic groups. We represent the competitive marketplace by means of a game‐theoretic model and motivate the existence of markets wherein the only Nash solution may be in mixed strategies. Given deterministic behavior on the part of the firms, we interpret this solution in terms of a strategic groups equilibrium. The major implication of this analysis is that strategic groups can exist even if there is no inherent asymmetry (in terms of skills) between firms.