Game Theory Analysis of SAG-AFTRA Strike and Food/ Beverage Industry Competition

Part 1 –

You are to construct a relevant game tree for the 2023 Screen Actors Guild and American
Federation of Television and Radio Artists (SAG-AFTRA) strike based on the ‘ultimatum game’. You
will need to identify the two players and make explicit your assumptions, with the following
instructions in mind:

? Specify who is ‘Player 1’ (the Proposer) and who is ‘Player 2’ (the Responder) for these two
parties in a game tree.
? Think of this as a sequentially played game with three rounds in total over time:

• Each strategy has an associated payoff.
• In this game, you will need to work out what the associated numerical
  (hypothetical) payoffs are. Use payoff integer values of 0 to 10.
•  Provide reasons for the payoff values you assign and what they symbolise.
• Explain in words the game and each specific outcome you come across.

? In your analysis, discuss the role of power and preferences amongst the players and how
this affects the allocation, including a scrutiny of fairness in the resolution.

Part 2 –

You are to construct a relevant payoff matrix (in numbers only) based on the key news articles.
To help you construct the payoff matrix, here are the key parameters and assumptions:

? This is a game played between major competitors in the food/beverage industry with
market power in the largest economy, around Q3 to Q4 2023. There are two players –
‘Player 1’ is ‘corporation 1’ (e.g. PepsiCo), and ‘Player 2’ is ‘other corporations’ (e.g. CocaCola, Red Bull etc.).
? There are two strategies – ‘maintain prices’ (MP) or ‘reduce prices’ (RP).

• Each strategy has an associated payoff.
• The number for the payoff symbolises profits.
•  Players act rationally.
• Firms’ main customers are from middle- and higher-income levels with strong
  consumer demand.

Think of this as a simultaneously played game: this is a game played once and is repeated more than
once, yet the rules, players, and payoffs are the same each time.
In this game, you will need to work out what the associated numerical (hypothetical) payoffs are.
Explain in words each quadrant and any specific outcome you come across.

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