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Game Theory: Saab Survives

http://www.reuters.com/article/2011/10/28/us-saab-idUSTRE79R1MZ20111028

Two Chinese companies Pang Da and Youngman will purchase Saab for 100 million euro ($141 million) to save it from bankruptcy. Swedish Automobile (formerly Spyker Cars) bought Swedish car maker Saab from General Motors in 2010 hoping to expand the Swedish automotive industry. Less than 2 years later, Saab is struggling to produce cars and is on the verge of bankruptcy. Swedish Automobile chief executive Victor Muller did everything he could to save Saab from creditors filing for bankruptcy and he finally succeeded by closing a deal with the Chinese.

This transaction is easily simulated through a simplified version of game theory. Each player (company) has two options. Swedish Automobile can either sell Saab or not sell it. Pang Da and Youngman can either buy Saab or not buy it. This game has two possible outcomes, either both players agree to a transaction or they do not. The outcome in this situation is obvious: both players would play their dominant strategy and make the transaction in order to maximize their payoffs. Swedish Automobile prefers to sell to minimize losses and Pang Da and Youngman prefer to buy to acquire profit.

Pang Da and Youngman

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