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When the Leader follows - Lessons from Sailboat racing

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Winning the battle for market leadership is at the heart of competitive strategy. Overtaking the market leader has often been termed “dethronement” in prior literature and is considered a key managerial objective ( Ferrier, Smith, & Grimm, 1999 ;   Smith, Ferrier, & Grimm, 2001a ).   Management scholars across different fields have shown that imitating leaders can be an effective way for followers to catch up with and surpass the leader ( Posen, Lee, & Yi, 2013 ). However, less attention has been given to the possibility of leaders imitating competitor moves and to the performance consequences of such a strategy. This is surprising, since leading firms do leverage imitation strategies in attempts to defend their leadership. For example, Apple, the market leader in smartphones for a number of years, imitated the moves made by Samsung in offering larger screens for iPhones two years after Apple’s chief executive officer (CEO) publicly stated that phones w...
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Dollar auction game by game theory pioneer Martin Shubik

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The dollar auction is a non-zero sum sequential game designed by economist Martin Shubik, a pioneer of game theory,  to illustrate a paradox brought about by traditional rational choice theory in which players are compelled to make an ultimately irrational decision based completely on a sequence of apparently rational choices made throughout the game, also known as "escalation of commitment" src wiki A one dollar bill is put up for auction with the following rule: the bill goes to the winner, however the second bidder also loses the amount that he bids. The winner can get a dollar for a mere 5 cents, but only if no one else enters into the bidding war. The second-highest bidder is the biggest loser by paying the top amount they bid without getting anything back. The game begins with one of the players bidding 5 cents (the minimum), hoping to make a 95-cent profit. They can be outbid by another player bidding 10 cents, as a 90-cent profit is still desirable. Similar...
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