Advanced Micro Devices Inc (AMD)

[neye_eve]

econo - AMD INTC prisoner's dillema

The similarities between AMD v INTC pricing and the prisoners dillemas may seem easy to draw, but I'd submit that there is at least 1 major flaw in this line of reasoning with respect to a large number of trials.

In the prisoner's dillema, each party takes his lumps and that's that. You get 5 years in jail, so be it, nothing else affects your utility from the situation.

Play it repeatedly, tit-for-tat or otherwise, and in the end, you still serve a given number of years in jail.

With AMD and INTC, however, you don't just have 1 magic $ or utility number in each of the quadrants. Instead, you have that number (the immediate benefit), plus some other component which would represent the benefit or cost of the opponent's situation.

Easiest example? If, in three trials INTC can hurt itself, but hurt AMD even more, to the point where AMD is forced to exit the business, then INTC will act in such a manner.

Unlike the examples you cited, AMD and INTC are playing neither just one trial nor an infinite number. They are going through a certain number of trials that is directly related to how each of them play it, where each would like to stop the game on their own terms (because that would lead to monopolistic rent-taking until another competitor enters the market) due to the other's failure. Thus, they are given them non-standard prisoner's dillema incentives.

or am I way off base?

neye