The Pasta Wars: an exercise in game theory and oligopoly strategy
AP Micro-Economics, Daniel Burns
Ah, Verona! The picturesque Italian town of Shakespearean fame! The citizens of the city explain that its romance and its glamour are the product of Verona's miraculous pasta and sauces, whose secret recipes are jealously guarded by its only restaurant, Luigi's Pasta Bar. Tourists and locals alike crowd the tables every night, hoping for a touch of magic....
Magic or not, the legend suits you just fine. You own a flour mill in town and supply Luigi's with flour for its pasta. You compete with three other mills, all of which, like your own, have been handed down in the same families for hundreds of years. No one tries to compete with Luigi's and hardly anybody cooks their own pasta anymore - so the four of you sell your produce only to Luigi's. The town is also famous for family rivalry; competition is fierce and the hostility between the four families of mill owners is as thick as Luigi's famous Pomadoro sauce: you have not spoken to each other for generations.
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Game source: Ebner, Noam and Winkler, Yifat, The Pasta Wars: A Prisoner's Dilemma Simulation-Game (2008). Ebner, N. & Winkler, Y. , (2008) PASTA WARS: A prisoner’s dilemma simulation-game. Simulation & Gaming 40(1), 134-146.
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