Assignment Description:

Strategic Decision-Making with Game Theory and AI Tools

In this assignment, you will apply core game theory conceptssuch as Nash equilibrium, dominant strategies, sequential decision-making, and entry deterrenceto a real or simulated business scenario. You will enhance your analysis using an AI-powered tool (such as ChatGPT, Google’s Gemini, or another large language model) to help simulate, analyze, or critique strategic behavior in a competitive environment.

The goal is to explore how artificial intelligence can be used to support strategic economic reasoning in dynamic, competitive settings.

Step 1: Select or design a scenario

Choose one of the following (or propose your own, with instructor approval):

• A pricing competition between two tech firms (e.g., Apple vs. Samsung)
• A market entry scenario involving an established player and a new entrant (e.g., Amazon vs. an emerging e-commerce platform)
• A repeated game involving cooperative pricing strategies in a regulated industry (e.g., airline ticket pricing)
• A sequential investment game (e.g., Tesla vs. a legacy automaker on EV plant expansion)
• Briefly describe the players, strategies, and stakes involved.

Step 2: Apply game theory concepts

Using the scenario above:

• Identify potential dominant or dominated strategies
• Construct a simple payoff matrix or game tree (if applicable)
• Determine one or more Nash equilibria or use rollback reasoning to analyze sequential moves
• Discuss how the outcome may change if the game is repeated

Step 3: Use AI to support or simulate the decision

Using an AI tool (e.g., ChatGPT):

• Ask the AI to play the role of a competitor, simulate a response, or critique your strategic recommendations
• Alternatively, ask the AI to generate variations in strategies and predict how outcomes might shift under different assumptions (e.g., changes in costs, preferences, or market rules)
• Document your interaction and summarize the AI’s contribution to your analysis

Example prompts you might use with the AI:

• “Given this payoff matrix, what would be the Nash equilibrium and why?”
• “If Firm A expands capacity, how should Firm B respond based on backward induction?”
• “Simulate a tit-for-tat strategy in a repeated pricing gamehow sustainable is cooperation?”

Step 4: Reflect on AI’s role in economic decision-making

• In a short reflection (200300 words), discuss:
• How helpful was the AI in identifying or validating your strategic analysis?
• Did the AI offer any insight you hadnt considered?
• What are the benefits and limitations of using AI in economic strategy or consulting?

The following specifications are required for this assignment:

• Length: 1250-1750 words; answers must thoroughly address the questions in a clear, concise manner.
• Structure: Include a title page and reference page in APA style. These do not count toward the minimum word amount for this assignment.
• References: Use the appropriate APA style in-text citations and references for all resources utilized to answer the questions. Include at least three (3) scholarly sources to support your claims.

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