http://money.cnn.com/news/newsfeeds/articles/newstex/IBD-0001-22942744.htm

On February 1, Microsoft offered $44.6 billion deal to Yahoo. While reading some of the articles, it was interesting to find out that many articles described MS-Yahoo deal as a game. Some articles, including the one linked above, referred to the specific type of a game called the chicken game, another name for Hawk-Dove game. Although the meaning of a game used in articles is not exactly same as the term used in game theoretic methods, applying the definition of a game discussed in the class would be useful analyzing MS-Yahoo deal.

Applying the definition of a game, this deal can be analyzed as a game played by 2 players, MS and Yahoo, with set of strategies and payoffs. For Yahoo, set of strategies could be simply accepting or rejecting the offer or it could be more complicated such as five possible scenarios analyzed by Mark Mahaney, an analyst with Citigroup. (http://blogs.barrons.com/techtraderdaily/2008/02/05/yahoo-the-five-scenario-analysis/) Players can determine payoffs by analyzing relevant numbers such as market share and revenue. (http://www.zdnet.com.au/news/business/soa/Microsoft-Yahoo-deal-Playing-the-numbers-game/0,139023166,339285649,00.htm)

Yahoo rejected Microsoft’s offer on February 11. In addition, Yahoo began talks with Google, News Corporation, and Time Warner; however, the game is not over. The game is changing overtime as one player reveals its own best strategy with respect to other player’s set of strategies by adding new strategy to the game. Also additional players may influence the game when Google and Time Warner try to participate in the game.

For each player, it is important to have a clear understanding of possible set of strategies and payoffs so that each can choose the best response. According to the email from Jerry Yang, CEO of Yahoo, to Yahoo employees, what they are trying to do is to discover the set of strategies available to them, “our board is thoughtfully evaluating a wide range of potential strategic alternative” (http://www.sec.gov/Archives/edgar/data/1011006/000095013408001763/f37757exv99w1.htm) It is important to not only analyze and choose among given strategies, but to develop new ones.