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Game theory provides powerful tools to help analyze a situation and choose the “best” outcome. A massive firm or individual are applying game theory concepts to help them best (note: AB Inbev is doing it just not being talked about). Read the passage”Are We in Danger of a Beer Monopoly?” from http://www.nytimes.com/2013/03/03/magazine/beer-mergers.html?hpw&pagewanted=all&_r=1&
According to Adam Davidson’s NY Times blog entry, the DOJ is using modern tools of managerial economics when seeking to block Anheuser-Busch InBev from buying the rest of Grupo Modelo. AB InBev was formed by a recent merger and Corona’s 7% US market share goes to Grupo Modelo.
The case is not built on any leaked documents about some secret plan to abuse market power and raise prices. Instead, it’s based on the work of Justice Department economists who, using game theory and complex forecasting models, are able to predict what an even bigger AB InBev will do.
At the same time, entry has been common,
In 1978, there were 89 breweries in the United States; at the beginning of this year, there were 2,336.
But almost all of these entrants are tiny and their products are quite differentiated from the big guys’.
Answer the question below：
It seems the goal of AB Inbev is to become a monopoly. However, there are thousands of craft breweries and microbreweries that compete against it. Moreover, the market share for AB Inbev’s products has been declining; while the growth of the much smaller breweries is in the double digits. AB Inbev has recently tried to tap into the craft beer market by creating new brands and trying to disguise them as craft (e.g. Shocktop) or create new beers that are different from their main products (Bud Light Platinum, the various Beerita beers, etc.). AB Inbev can financially support these beers better than craft breweries through advertising and taking losses. Create a scenario where AB Inbev can enter and advertise, enter and not advertise, or not enter the craft beer market. In your scenario, have a craft brewery compete against it. Have the craft brewery already in the market. Create your own profits, and select the Nash Equilibrium.
The content should be APA style, no less than 3 pages of content, no less than 4 references.