In this article, the author describes the entrance of a new competitor into the mobile market.  In particular, in Great Britain, a new company, Hutchison 3G has attempted to break into the ultra-competitive wireless communications industry.  However, as expected, they have had a considerable amount of difficulty persuading customers to leave their current wireless providers and join the new company.  This is reflected in the fact that Hutchison 3G has not yet been able to even gain 100,000 subscribers to its network.  As a result, Hutchison 3G has launched a new marketing plan that offers considerably lower billing fees per month for the same number of minutes.  Their new billing structure is up to 50% cheaper than their competitor’s prices.  Understandably, this has created a shockwave in the mobile market as Hutchison 3G’s offer is much better than those currently offered by Hutchison 3G’s competitors (the dominant market forces).  In “prisoner’s dilemma” terms, by lowering prices a significant amount, Hutchison 3G has just entered a situation where it has “confessed” in the sense that they chose an optimal strategy to gain a greater “deal” in this given situation.  By “confessing” (lowering prices), they are forcing their competitors to somehow react to this shock to the mobile market.  According to game theory, Hutchison 3G’s competitors (the mobile companies that currently have a large market share in the mobile industry) should also “confess” by lowering prices for their phone plans in order to compete with Hutchison 3G because consumers are most likely to take the more cost-efficient option (which at this point is offered only by 3G).  Thus, as Hutchison 3G’s competitors lose market share to Hutchison 3G, they will be forced to “confess” because not doing so will result in a greater cost in terms of profitability.

However, the author states in this article that in this case, game theory does not hold because if Hutchison 3G’s competitors were to lower prices, it would not result in optimal profitability because the author believes that all mobile companies will lower prices in reaction to this shockwave and it will just result in a total loss in profitability for the mobile industry while the market share stays roughly the same due to the lower monthly phone plans.  The author goes on to state that these competitors should rather defy game theory by offering a micro-level alternative in which it comes up with innovative solutions to maintain their high level of profitability even though it may lose some market share.  Such an alternative does not require these companies to lower their monthly phone plans, but for example, improve efficiency or customer satisfaction.

For example, in Ithaca, the majority of students at Cornell choose Verizon Wireless over AT&T due to the fact that Verizon’s coverage in this area is significantly better than AT&T’s even though AT&T offers lower monthly phone plans.  Furthermore, Verizon’s INNetwork, in which Verizon customers can place free phone calls to other Verizon customers, is an example of an innovative solution to the problem because Verizon is not “confessing” while companies such as AT&T are “confessing” by lowering the price of monthly phone plans.

After reading this article and another article, which is linked, states that game theory does not always apply in every single situation, I am convinced that game theory is not always the best option for every situation.  Although it may apply for most situations, there are instances, such as the one cited in this article, where using game theory is not always the best strategy for the long run.  This example shows that game theory is limited in the sense that in this innovative and competitive society in which products and services can always be offered for lower prices by competitors who are looking to gain an upper hand in a given situation, new ways of thinking and strategizing are very crucial to the success of any business or industry.

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