To what extent can prisoners dilemma in game theory be used in pricing strategy?

Abstract

The title of this dissertation is to what extent can prisoners dilemma in game theory be used in pricing strategy? The purpose of the current study was to determine the extent of prisoner's dilemma used in pricing strategies, and how the prisoner's dilemma is used in pricing strategies. We first comprehensive analysis and evaluation of relevant literature about prisoners dilemma and common pricing strategies in literature review section. Then in discussion part, we use game theory models to describe and analyze the prisoner's dilemma in pricing strategies to predict various situations, make the optimal pricing strategies. In the dissertation, we found the effects of prisoners dilemma strategies on payoffs when pricing and explained why cooperative pricing agreements promote mutual benefits and long-term stability than non-cooperative pricing strategies. Then we analyzed the stability of cooperative pricing strategy, we also developed a pricing model based on Bayes theorem. Our research has important implications for economics, marketing and game theory. By applying prisoner's dilemma theory, firms can better understand the behavioral of competitors and enhance decision-making processes, optimize their pricing strategies, thereby enhancing market efficiency and profitability.