In the ratings battle, each network’s sole interest is in maximizing its total
audience.^3 With this goal in mind, what is each network’s optimal action?
Table 10.1 provides a relatively simple answer: Each network should schedule
its hit show in the 8-to-9 P.M. slot. To confirm this, first take NBC’s point of view.
To find its own best course of action, NBC must anticipate the behavior of its
rival. Obviously, there are two cases to consider:- If CBS schedules its hit at 8 P.M., NBC should follow suit. By doing so,
its total audience is 36 million. NBC’s alternative—placing its hit at
9 P.M.—would deliver a smaller audience of 30 million. Leading with
its hit is NBC’s best response if CBS leads with its hit. - If CBS schedules its hit at 9 P.M., NBC’s best response would continue
to be leading with its hit. (An audience of 39 million is better than an
audience of 32 million.)
In short, regardless of CBS’s action, NBC’s audience-maximizing response is to
schedule its hit at 8 P.M.
A dominant strategyis a best response to anystrategy that the other player
might pick. Thus, we have shown that scheduling its hit at 8 P.M. is NBC’s dom-
inant strategy. By similar reasoning, CBS’s dominant strategy is to lead with its
hit. (If NBC schedules its hit at 8 P.M., CBS prefers a 33 million audience to a
28 million audience; if NBC puts its hit at 9 P.M., CBS prefers a 36 million audi-
ence to a 30 million audience.) The predicted outcome of the ratings battle is
for each network to use its dominant strategy, that is, schedule its hit at 8 P.M.
This results in audience shares of 36 million and 33 million, respectively.
As a simple variation on this example, suppose CBS is aware that schedul-
ing its hit against NBC’s hit would be suicidal. (Imagine NBC’s hit to be the top-
rated show.) To illustrate, change CBS’s top-left entry in Table 10.1 from 33 to- How does this change CBS’s behavior? Now CBS’s best response is to put
its hit at 9 P.M. if NBC schedules its hit at 8 P.M. (Of course, CBS’s best response
is to put its hit at 8 P.M. if NBC schedules its hit at 9 P.M.) In other words, CBS
should set its schedule to avoid a showdown of hit shows. CBS no longer has a
dominant strategy; rather, its best response depends on what NBC does.
Nonetheless, its optimal action is easy to determine. NBC surely will choose to
schedule its hit at 8 P.M., because this is its dominant strategy. Anticipating this
404 Chapter 10 Game Theory and Competitive Strategy(^3) In different contexts, a player’s payoff may take many forms: a monetary value (such as revenue,
cost, or profit), a litigation victory, the number of electoral votes won, market share, and so on. The
general point is that the payoff is meant to capture everythingthe decision maker cares about—his
or her ultimate objective or utility to be maximized (or, if a cost, to be minimized). One implica-
tion of this point is that comparisons of player payoffs are notmeaningful. For instance, if player
1 faces the payoff entries (5, 3), he derives no welfare from the fact that the other player makes
a loss. The player’s welfare is completely captured by his own five units of profit. The player fares
better with the payoff (6, 10). In short, his or her motives are neither competitive nor altruistic;
they are simply self-interested.
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