econ case study 1
priysha90
CASESTUDYINSTRUCTIONS2.pptxCASE STUDY: USE OF GAME THEORY TO MAXIMIZE PROFITS
INSTRUCTIONS AND HINTS
Due Week 7 and worth 250 points
Use this article and three (3) others to answer the following questions in 5–7 pages:
https://mindyourdecisions.com/blog/2013/03/05/southwest-airlines-boarding-and-game-theory/
Question 1: Describe the change in Southwest Airlines’ boarding process (10 %)
Boarding prior 2007
“Cattle call”
Choice of seats
Problems
The new boarding process
Boarding groups and numbers
How are groups and numbers assigned?
Choice of seats
How is the “cattle call” problem is solved?
How the new boarding process changed the game?
Time value
Third-party websites
Early-bird check-in
Question 2: What was Southwest’s main goal introducing the early-bird check-in? (15 %)
Effect on revenue and profit
Do some research on Southwest’s revenue and profit.
Check the section of the article titled “The bottom line: profits, profits, profits”.
Question 3: Explain how Southwest Airlines used the game theory approach to increase its profits (20 %) a. What is the outcome of the game involving early-bird check-in?
Options:
Pay $10 for good seat
Pay $0 for a lottery style seating
Check the table with outcomes and explain why early-bird check-in is the outcome of the game.
Question 3: Explain how Southwest Airlines used the game theory approach to increase its profits (20 %) b. Identify what is the passengers’ dominant strategy.
Define dominant strategy.
Explain why early-bird check-in is the dominant strategy for Southwest Airlines customers.
Question 3: Explain how Southwest Airlines used the game theory approach to increase its profits (20 %) c. Determine why travelers face the Prisoner’s Dilemma with the early-bird check-in process.
Define Prisoner’s Dilemma.
Check the table with outcomes.
Explain why travelers face the Prisoner’s Dilemma with early-bird check-in.
Explain why travelers are essentially stuck in the early-bird check-in game.
Question 4: Analyze the advantages and disadvantages of the early-bird check-in process for Southwest Airlines (15 %)
Check the section of the article titled “The bottom line: profits, profits, profits”.
Questions to think about:
Why travelers cannot stop playing the game?
What happens when too many travelers use the early-bird check-in option?
What is the probability of Southwest Airlines having a problem with early-bird check-in the future?
Question 5: Suggest ways in which other companies, or the company you work for, can utilize similar game approach to maximize profits (30 %)
Options:
Do some research on how other airlines’ use of game theory,
or
Do some research on the use of game theory in sectors other than airlines.
or
Identify policies in the company you work for that utilize game theory approach. For example:
Relationships with customers
Management – employees relationships
How using game theory approach affects the bottom line of the company you chose?
6. Use of at least 3 academic quality references, and one has been published in the last 3 years (5 %)
Use at least three academic references.
Avoid referring to Wikipedia, other encyclopedia, and dictionaries.
See grading rubric for details.
7. Clarity, writing mechanics, and formatting requirements (5 %)
Grammar
Clarity
Organize in five section, starting with the questions followed by your answers.
Use APA formatting and reference style.
See grading rubric for details.
