General Electric Power Unit Faces “Prisoner’s Dilemma” as Prospects Dim
Resource: https://www.thestreet.com/markets/general-electric-faces-prisoner-s-dilemma-with-power-unit-14696069
An increase in competition and decreased demand for turbines and power plants, the future of General Electric’s power unit does not look bright. GE is the market share leader in installed power equipment, which makes them more likely to take a hit with increasing competition and poor service reports. However, J.P. Morgan analyst Stephen Tusa wrote that the unit’s dim future may be more of a structural issue as well. Thus, Tusa said “This looks to us like a prisoner’s dilemma where GE either walks from business, turning up the heat on the melting ice cube, or cuts price to maintain the installed base, slowing the speed of the secular decline, while they figure out a strategy forward.”
As discussed in class, a Prisoner’s Dilemma is when there is no clear strategy to choose for either player, because there is a potential loss to whatever strategy is chosen. Essentially, it is a game theory that shows why two players may not cooperate, even if there is a strategy that appears to be in their best interest. In this case, the two players are the market and GE’s power unit. Since the market cannot be predicted, GE is faced with a dilemma, as the market may not “cooperate” in “choosing” (acting in essence of) the strategy that is most beneficial for the two.