Final Cash Balances in $CSG M

1
Final Cash Balances (in CSG M)
Average team ending cash balance (BAL) across all
four games 2.1M
2
Cost Positions Game X1 and X2
96
226
106
483
True mean
96
226
106
483
3
Cost Positions Game Z1 and Z2
96
226
106
483
True mean
96
226
106
483
4
Adjusted Score

• Add expected returns to all teams cash
  positions based on initial cost position
• 407s costs were five standard deviations below
  the mean in market B, which is worth about 1.6M
• Only the best three cost positions in each
  game-market are adjusted. Assumes 4000 units
  sold in A and 2000 in B and D for top 3 players.
  No adjustment for C. Why?
• Does not account for the play of the game in
  any way
• Compare expected outcome to actual (in
  millions)
• Score (Expected Actual)10

5
Adjusted Over/Under Score
Performance (End cash balance)
Cost advantage (Expected cash)
6
Adjusted Over/Under Score
Top quartile
Bottom quartile
7
Profit Calculations

• Profit operating profit fixed costs
• Operating profits q(p-c)
• Fixed costs computed using average cost of BBAL
  in capacity
• Shown without consideration of entry costs

8
X1 Market A
Beginning Capacity (K units)
Profits (100K)
P125
P104
P62
Overall Profit
99
81
91
103
86
88
95
68
1.3
1.9
1.8
2.2
1.5
2.3
1.9
1.6
Cost
308 Why build 4K units of capacity and drop
price by 42? Who blinked? Why? 305 Why
didnt you exit?
9
X1 Market B
Beginning Capacity (K units)
Profits (K)
Overall Profit
1.3
1.9
1.8
2.2
1.5
2.3
1.9
1.6
Cost
269
238
228
225
250
244
232
237
304 Why did you expand capacity in round 6 and
then reduce it again in 7?
10
X1 Market C
Beginning Capacity (K units)
Profits (K)
Overall Profit
1.3
1.9
1.8
2.2
1.5
2.3
1.9
1.6
Cost
112
111
116
107
115
120
106
105
301 Why arent you in this market? Cost
position is actually better than in B 303 Why
wait until the end of round 7 to sell the extra
500 units of K?
11
X1 Market D
Profits (K)
Beginning Capacity (K units)
Overall Profit
Cost
1.3
1.9
1.8
2.2
1.5
2.3
1.9
1.6
492
471
494
625
487
528
505
470
307 Why enter at the end of round 5? Why did
you think others would sell? 301 Why p499 in
R6 (seems very high)? Why did you exit after
round 8? 306 Why did you shrink so much after
round 7? 302 Why not try to close out the
market in round 3 or 4? Why did you blink?
12
X2 Market A
Beginning Capacity (K units)
Profits (100K)
P37
Overall Profit
Cost
93
96
92
93
96
64
85
84
1.5
3.2
(1.0)
2.4
3.0
2.9
(4.5)
2.1
316 Why increase capacity in round 2? Why wait
until after round 5 to drop capacity? 314 Why
price at 37 in the 2nd round? Why hold 6K until
round 6?
13
X2 Market B
Beginning Capacity (K units)
Profits (K)
Overall Profit
Cost
185
213
273
316
194
281
270
266
1.5
3.2
(1.0)
2.4
3.0
2.9
(4.5)
2.1
309 Why arent you here? Why leave 1.5-2M on
the table? 313 Strategic reason for operating
at 30 K utilization for most of the game? 310
Why did you price consistently below 313?
14
X2 Market C
Beginning Capacity (K units)
Profits (K)
Overall Profit
Cost
113
115
112
107
114
114
112
119
1.5
3.2
(1.0)
2.4
3.0
2.9
(4.5)
2.1
312 Why expand at the end of rounds 3 and 4?
What happened to price? In what sense are you
competing against yourself in a differentiated
market?
15
X2 Market D
Profits (K)
Beginning Capacity (K units)
Overall Profit
Cost
1.5
3.2
(1.0)
2.4
3.0
2.9
(4.5)
2.1
335
451
446
559
656
468
568
501
315 Why enter? Why increase capacity end R3?
Why keep K so high for so long? 311 Why didnt
you exit after round 3,4,5,6? Why p350 in R5
when 321 didnt clear in R4?
16
Z1 Market A
Beginning Capacity (K units)
Profits (100K)
Overall Profit
Cost
86
104
74
89
91
88
111
107
2.1
2.1
3.1
1.9
1.9
1.6
4.6
2.2
403 Why exit as the leading player in a duopoly
with one round to go? 404 Why did you stay in
this market after R 3,4,5,6 were so bad? 401
Why enter so small and then exit?
17
Z1 Market B
Beginning Capacity (K units)
Profits (K)
Overall Profit
Cost
249
207
253
223
248
272
123
207
2.1
2.1
3.1
1.9
1.9
1.6
4.6
2.2
407 Why not try to be a monopolist in this
market at say p200 for x rounds? 408 Why the
capacity spike in R7? Why didnt it lead to more
profits?
18
Z1 Market C
Beginning Capacity (K units)
Profits (K)
Overall Profit
Cost
113
114
116
119
113
113
109
111
2.1
2.1
3.1
1.9
1.9
1.6
4.6
2.2
405 Why did your profits increase in R6 and 7
after you dropped capacity, even though market
capacity remained above R3 levels?
19
Z1 Market D
Profits (K)
Beginning Capacity (K units)
Overall Profit
Cost
641
435
467
543
523
394
455
547
2.1
2.1
3.1
1.9
1.9
1.6
4.6
2.2
406 Why shift from p849 in R6 to p499 in
R7? 402 How did you respond to 406s R6 price
and why?
20
Z2 Market A
Beginning Capacity (K units)
Profits (100K)
Overall Profit
Cost
67
110
99
90
120
105
97
115
3.0
2.1
1.8
3.7
2.8
6.4
2.3
1.2
409 How did you enforce discipline in this
market? 415 Why enter small and late and play
on the fringes?
21
Z2 Market B
Beginning Capacity (K units)
Profits (K)
Overall Profit
Cost
3.0
2.1
1.8
3.7
2.8
6.4
2.3
1.2
318
240
303
149
187
299
223
322
412 Why carry 7K units of K for 3 rounds and
then shift to 1K? 413 Why not price more
aggressively early on given excess K?
22
Z2 Market C
Beginning Capacity (K units)
Profits (K)
Overall Profit
Cost
3.0
2.1
1.8
3.7
2.8
6.4
2.3
1.2
111
107
114
110
108
113
108
115
416 Why stay at p225 even as building capacity
in R5 and 6? 409 Why arent you here?
23
Z2 Market D
Profits (K)
Beginning Capacity (K units)
Overall Profit
Cost
3.0
2.1
1.8
3.7
2.8
6.4
2.3
1.2
479
566
441
392
628
378
483
568
412 Why so slow to enter? Why not increase K?
Why such a tepid fight? 414 What happened in
R5? How did you signal to 412? 411 Why not
play in this market?
24
Lessons from the CSG

• Position matters but the play of the game is
  often more important
• Market attractiveness (market D) is not
  sufficient to make profits
• See 315
• Anticipating response how will my opponent play
  and what should I do?
• Average performance X1 1.8m, X2 1.2m, Z1
  2.4, Z2 2.9 (medians are 1.85m, 2.25m, 2.1m,
  2.55m)

25
Lessons from the CSG

• Signaling is hard
• Very hard to enforce price discipline in markets
  with multiple players
• Z1 Market D 406 and 402 unable to coordinate on
  follow the leader
• The formal rules of the game matter
• Often called institutions
• Note how war of attrition may have worked for
  some teams in a different context (but not this
  one)
• Everyone can play in differentiated markets, but
  big producers compete against themselves