He ran computer simulations to determine the winner. The goal here is to change the structure of the game so that the mutually advantageous outcome is a Nash Equilibrium. Differentiate your product with design improvements, service, or advertising. Seek a cost advantage. Develop unique distribution channels.
Commitment turns a simultaneous move game into a sequential move game.
Exensive form games allow you to analyze sequential move games, and games where one player is committed to following a certain strategy. To analyze these games, look ahead, then reason back . Here, firm 2 tells firm 1 that it will punish severely if firm 1 prices low. If firm 1 believes firm 2, the equilibrium is to both price high. The more severe the punishment, the less likely rivals will price low.