ABSTRACT
In this chapter we will take a closer look at two-player, noncooperative, one-time, static games. In a static game, the players are ignorant of their rivals’ decisions until after all moves have been made. In business, for example, a fi rm’s profi ts may depend not only on the decisions made by its managers, but also on the decisions made by managers of rival fi rms as well. In noncooperative, one-time, static games, the players do not take possible future moves into consideration; they are interested only in the immediate consequences of their decisions. Understanding one-time static games is important because it is the fi rst step to an understanding of a wider range of strategic situations involving static games that are played repeatedly. Competition among rival fi rms, for example, involves strategic interaction that occurs repeatedly over time. If fi rms cooperate to achieve mutually benefi cial outcomes, the behavior of business rivals in one period will most certainly affect how the players interact in the future.
