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- Title
Subgame perfection and the ethics of competition.
- Authors
Arce M, Daniel G.
- Abstract
This paper integrates economics and business ethics through the use of the subgame perfection/backward induction decision rule. It is shown that textbook examples of subgame perfection differ in their ethical complexity. Specifically, predatory pricing is difficult to justify on both game-theoretic and ethical grounds, whereas 'poison pill' takeover defenses have complex economic and ethical ramifications. Further, I employ backward induction to examine two additional areas of ethics and management decision-making: product recall (the Ford Explorer and Firestone tires), and price versus advertising competition.
- Subjects
UNFAIR competition; BUSINESS ethics; PRICING; PRICE fixing; DECISION making; ANTITAKEOVER strategies; PRODUCT recall; CONSULTING firm standards
- Publication
Managerial & Decision Economics, 2005, Vol 26, Issue 6, p397
- ISSN
0143-6570
- Publication type
Article
- DOI
10.1002/mde.1239