Subgame perfection and the ethics of competition

Daniel G. Arce M
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Daniel G. Arce M: Rhodes College, 2000 North Parkway, Memphis, TN 38112, USA, Postal: Rhodes College, 2000 North Parkway, Memphis, TN 38112, USA

Managerial and Decision Economics, 2005, vol. 26, issue 6, pages 397-405

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. Copyright © 2005 John Wiley & Sons, Ltd.

Date: 2005
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Persistent link: http://EconPapers.repec.org/RePEc:wly:mgtdec:v:26:y:2005:i:6:p:397-405

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