Economics Insights @ CBS

Both noncooperative and cooperative game theory have been applied to business strategy. We propose a hybrid noncooperative-cooperative game model, which we call a biform game. This is designed to formalize the notion of business strategy as making moves to try to shape the competitive environment in a favorable way. (The noncooperative component of a biform game models the strategic moves. The cooperative component models the resulting competitive environment.) We give biform models of various well-known business strategies.

A conditional one-factor model can account for the spread in the average returns of portfolios sorted by book-to-market ratios over the long run from 1926–2001. In contrast, earlier studies document strong evidence of a book-to-market effect using OLS regressions in the post-1963 sample. However, the betas of portfolios sorted by book-to-market ratios vary over time and in the presence of time-varying factor loadings, OLS inference produces inconsistent estimates of conditional alphas and betas.

This research addresses refutation of false beliefs formed on the basis of repeated exposure to advertisements. Experiment 1 explores belief in the refutation as a function of the perceptual details shared (alignment) between the claim and the refutation as manipulated by whether the original claim was direct (assertion) or indirect (implication). Experiment 2 then examines whether this effect will carry through to belief in the original claim after exposure to the refutation. Findings indicate that direct refutations of indirect claims are believed more than refutations of direct claims.