COOPETITION AND RECOMPESE BETWEEN SUPPLIERS AND RETAILERS IN A
DUOPOLY PETROLEUM MARKET
Iuan-Yuan Lu1, Tsuang Kuo2, Ting-Syuan Lin3
1
1
Vice Chairperson of Asia Network for Quality
Professor, Institute of Business Administration, National Sun Yat-Sen University
No.70, Lien-Hai Road, Kaohsiung 804, Taiwan, R.O.C
[email protected]
2.
Associate Professor, Institute of Business Management, National Sun Yat-Sen University,
No.70, Lien-Hai Road, Kaohsiung 804, Taiwan, R.O.C
3.
Ph. D Candidate, Institute of Business Management, National Sun Yat-sen University,
No.70 Lien-Hai Road, Kaohsiung 804, Taiwan, R.O.C
ABSTRACT
Since the floating fuel price mechanism has started, the feedback mechanism of the competitions between the oil suppliers
and their own promotional channels in the duopoly market has formed an unusual phenomenon. The free petroleum trade
market is in the first stage. Both of C and F petroleum corporations fully control theirs gas stations as a static game
environment. According to the real world petroleum consume quantity in the market, the market shares ratio as the data
base game theory which has been used in discussing the payoff mechanism. Through the crude oil price vibration and the
effect promote strategy in rounds, this game thorough logically ratiocination and Mutation demonstrated by game tree is
presented in the paper. Both of the two major companies’ perspectives have been considered in the process of analyzing the
game. The result in this game that finds the promotions activity by brokers (gas stations between oil provider and
consumer) has more effect on the consuming than before. Inducting from dynamic game, the result discovers that it is
different from initiate game. That means the two main oil providers do not need to use the promotion strategy while their
brokers’ gas stations can provide more extra promotion for consumers. Both of the fuels providers just leave the retailers
developing their own promoting strategies. That would be the most appropriate situation for the two providers in the long
term. The whole seller price reflecting crude oil cost does not consider the impact from crude oil cost raise, which may
affect oil provider’s profit. The market leader just keeps maintaining the market share. It would be the adoptive strategy.
The final retail price generated by interaction among suppliers and their own channels is extremely sensitive to the
consumers’ choice. This study based on game theory provides oil suppliers and retailers the best timing to promote their
products instead of falling into a meaningless price war to earn more profit.
Keywords: Coopetition, Duopoly Market, Game Theory
INTRODUCTION
Energy shortage is a common crisis that all nations are facing. All oil-consuming nations in the world are increasing their dependence on
oil products; yet the supplying amount is gradually decreasing and is causing the continuous increasing of cost for the importers of
oil-demanding countries. This higher import price then is reflected in the retail price. Because of global economic recession, consumers’
sensitivity to price has largely increased, thus the timing and strategy of oil-product retailers and their reaction will greatly affect their
revenue. In the existing petroleum retailing system, the monopoly market has become a duopoly market. The operation of the price and
the competitive strategy plays an important role on revenues. Therefore, based on Game Theory, this study observes the gasoline dealers’
reaction to cost-shift deduction strategy of two mainly firm as C and F corp. so that a better understanding of their retailers’ coopetitive
1
strategy effect on revenue can be understood in general. Due to the inflation of energy price and global economic recession, consumers
are much more sensitive to the price of oil. The cost-shifting strategies and promotion strategies used by oil retailers will affect consumer
preference for the suppliers and retailers in the duopoly market. Based on game theory, this research deduces the following:
1. While facing the cost shift, according to the game theory, two major oil suppliers and the according retailers in Taiwan can deduce the best
timing to appreciate retailer price.
2. While the retailers face the cost shift, there are the effects of the promotion of both suppliers and the retailers on the revenue performance.
3. The effect of coopetitive strategy of both the suppliers and retailers reflects on the retailers’ performance.
LITERATURE REVIEW
Duopoly Market
In Economics, “Duopoly Market” means that there are two main sellers who can direct the competition by price or quantity. In both the
Cournot Game model and the Stackelberg model, prices are determined by quantity and price competitive Bertrand model that is main
category of duopoly market. The related papers of the recent years are as follows: Wang (1998) discussed that under the Cournot model,
companies facing the decline of both the product patent license expense and its cost are suggested that producer should protect the patent
right as it is one of the cost –competitive advantage. Since paying annual expense for patent license is greater than paying a fixed sum of
license expense, patent license expense is greater than a fixed license expense. James and Mark (1998) used experiences from the past to
design Cournot duopoly strategy and simulated to compare and analyze the differences of the marginal cost between before and after the
design simulation. Dolores and Amparo (1999) analyzed learning behavior of the enterprises under information uncertainty based on
duopoly game theory to construct the Cournot model by experiencing and comparing the difference between duopoly and unilateral
monopoly without sufficient information of market demand and price. Michele and Georges (2001) discussed that duopoly means that
two firms produce homogenous products to compete with each other and practice duopoly game theory under the protection measures.
Take “European Natural Gas” for example. To compare and analyze the Cournot and Stackelberg model, Marija and Bogataj(2001)
applied the spatial game model in the supply chain of homogenous products and assumed that there are two suppliers in the market with
a fixed total quantity of demand, and Marija and Bogataj used MRP and NPV method to investigate customer behavior to find the
optimum range of short supply and the optimum order strategy. Based on the concept of nonlinear duopoly Cournot game, Gian and
Michael (2001) discussed the optimum expected scheduling problem and proposed a mathematic model to construct a concrete
conclusion by the diagram of curves in a study case. Xing and Wu (2001) solved the two-stage optimum problem proposed by
Stackelberg game theory and used algorithm to get the optimum solution.
Game Theory
The Description of Game Theory
John Von Neumann and Oscar Morgenetem (1944) first bring up the concept of game in Theory of Games and Economic Behavior,
aiming to study the direct interaction of the decision-maker behavior and the equilibrium of the decisions (Rasmusen, 1994). Neumann
and Morgenetem also use math to simulate the conflict and cooperation of rational decision makers to provide more specific decision that
makes players more logic (Myerson, 1991). Based on the reasoning for strategies thinking, these strategies are examined by math model
to consistency of possible recognition in logic. Again, based on the proposed mathematical model, the study refers backward induction
method from the conclusion to the assumption; researchers have to comprehend the assumption of a certain conclusion to seek the best
reward equilibrium strategy for all players to receive best revenue in the game. The basic factors of a game contain:
(1) Player: Two or more players have to be decision making individuals.
(2) Action set：The game is assemble all possible actions from a certain player.
(3) Payoff function：There is the reward of a certain outcome for the player (Rasmusen，1994)；Every possible outcome may have a
specific preference, so the reward is given a number to show the preference.
The Category of Game Theory
The categories of game theory can be divided according to different principles (Rasmusen, 1994). According to the priority of players’
action, there are static game and dynamic game; the former means all players act at the same time and not knowing the other players’ act,
and the latter means there is a priority order for the players’ action and that one who act later can observe the former’s action. In addition,
there are two-party game and n-persons game. Still, there are also zero - sum game which means the lost of the loser is the payoff of the
winner and non-zero-sum game refers to the total payoff of all players isn’t zero. A two-party non-zero-sum game is that two parties can
both gain or lose from the game or one party gain while the other lose, yet their lost and gain can’t be equal.
Recompense mechanism
Bonache and Fernandez (1997) suggested the recompense that organization has offered to impel employers to overseas dispatch was
separated into two types—intrinsic reward and extrinsic reward. Intrinsic reward refers to benefit or monetary reward that is offered for
overseas dispatch employers, such as subsidies, bonus, etc. Extrinsic reward is invisible reward, such as professional development
opportunity, safety or praise. Besides, Bonache and Fernadez (1997) also suggested that companies should regard recompense as a
mechanism that can not only solve the international rotating problems, but also serve as guidance of employers’ behavior. Snell (1992)
inferred that to induce employers to improve their performance, the recompense system has to be combined with performance.
Purushotham (1997) confirmed the effect on improving performance behavior by the combination of performance and reward. Most of
the international enterprise’s reward systems are base on the combination of performance and reward; the outcome won’t be as good as it
was if they were separated (Pucik and Katz, 1986).
Promote Action
There are two types of promotion actions. One of them doesn’t point out its content directly and consider the promotion action that can’t
be arranged as advertisement, personal selling or public report as promotion action (Aaker, 1973). The other shows clearly the contents
of promotion action; for instance, Blattberg and Neslin (1990) defined promotion as a marketing event that concentrates on action and its
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purpose is to influence customer behavior directly.
Kotler(1991) defined promotion as a pack of inducing tool and mostly are for short-term use to stimulate the purchasing behavior of
consumers and distributors. Different manufacturers have different promotion purpose, and promotion purpose may also differ from
different stages.
Pride and Ferrell (2000) addressed possible promotion purposes and meanings of the manufacturers as follows:
1. Attention Drawing: By holding promotion actions to introduce consumer new products.
2. Demand Stimulation: Uncover the purpose and information about the product for the consumers.
3. Encourage to give a trial on new product: Try to win customers from the competitor.
4. Define target of the market: Inform customers that new product is designed for what kind of customer group.
5. Remain consumer loyalty: The cost to keep the original clients is much lower than to discover new clients.
6. Gain support from the retailers: For example, the advertisement will gain more support from retailers.
7. Expel the promotion effect of the competitor: This kind of action may not improve market share, but can prevent the effect of the
competitor’s promotion action on market share.
8. Diminish the fluctuation of sales volume: The manufacturers used to stimulate the customers’ purchasing behavior to increase sales
volume by practicing promotion action during the recession.
Buzzell, Quelch and Salmon (1990) divided promotion actions as the timing and type to gain inducing factor. Kotler (1991) sorted
promotion as price promotion (ex. price-cut, price discount, reimbursement) and non-price promotion (ex. sample, present, coupon, etc.).
METHODOLOGY
Research Frame
According to the real world petroleum consume quantity in the market, the market share ratio between C with F corp. in the market as the
data base in this study. Based on game theory, this paper discusses the payoff mechanism of C and F corp. in a static game. The original
payoff mechanism has been changed by the promotion actions of crop. C and F and thus has changed the original situation to form a new
dynamic game and new payoff mechanism. The model description and rationale are as follow:
Game Description
Player
Player 1: C Corp. (C)
Player 2: Gas station among C Corp (Cr)
Player 3: F corp. (F)
Player 4: Gas station among F corp. (Fr)
Player 5: Petroleum Consumer (B)
Strategy
Fuel Supplier and Gas station Owner
Player 1~4 both of 2 strategies can be choose
Strategy 1: Promotion (P)
Strategy 2: Non-promotion (NP)
Fuel Consumer (B)
Player 5 differ strategy choose with player 1~4.
Strategy 1: To fuel up at C corp.’s gas station (BC)
Strategy 2: To fuel up at F corp.’s gas station (BF)
Payoff
Both of C (Cp) and F (Fp) corp. “Each does things in his benefit way” set up to get the maximum profit as the goal.
Action Set
(1).The continual rise in price of crude oil causes fuel purchase cost to be higher than before, and this is reflected on sale price of
gasoline. Therefore, raised retailer price have influence consumers’ decision when they choose which gas station to fuel up.
(2).Petroleum wholesaler decision of whether to use the promotion strategy of fuel which affects the changing intention by customer
is determined by maximum profit.
(3).Gas station makes decision for maintaining the customer royalty and then, tries to make the maximum profit.
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LOGICALLY RATIOCINATION
Initiation of Game
Originally, retailers follow their wholesalers’ promotion strategy which makes decision through their suppliers in the duopoly market. In
the Prison Dilemma Game, both of them consider their opponent’s strategy plan when they make decision.
Table 1 Initiation of Game – The strategy of Gas station obey Petroleum Corp
C corp.
F corp.
Promote
Non-promote
Promote
(8,5)
(4,8)
Non-promote
( 12 , 2 )
( 10 , 6 )
In the long term, C and F Corporation are situated in industrial environment in which both the entry and retreating barriers are high. Both
of them have made their own promotion strategy in order to gain maximum profit of each as an infinite game. For the time being, C and
F Corporation tend to deviate from the original commitment (the non-promotion strategy of both sides) collaboration to the promotion
strategy configuration of both sides. Denote G (N) = (promote, promote) = (8, 5) as a Nash-equilibrium. The ratiocination progress as
follows:
From the Individual Rationality Perspective, both C and F Petroleum Corporation do not promote when they consider the added-profit
from saving promote expenditure as a collaboration. As Table 1, both of their strategy are set as (non-promote, non-promote). The
market share of C and F corp. is 10:6.
Meanwhile, they also consider the incentive consistency to promote while the other competitor does not promote to earn extra profit. So,
both of the two parties tend to deviate from the original commitment while they consider the incentive from extra profit without being
penalized by deviating from G (1). The one-shot game would not be able to exist in the high entry and retreat obstacle industry,
especially in the petroleum industry. So, C and F corp. are lying in G (∞) with penalty to impede deviation from occurring and obey their
original commitment in the individual rationality thinking. Then, they tend to corporate each other.
In situation of G (∞) without penalty, both of the two parties choose to deviate from original their commitment and tend to give out free
promotional ‘gifts’ in order to try and secure satisfactory sales. Therefore, the Nash-equilibrium is (promote, promote) = (8, 5) in G (1)
and G (∞). While in the situation of ∞>G>1, the effect of penalty forces the two-parties to obey their commitment, and thus the
Nash-equilibrium is (non-promote, non-promote) = (10, 6). Because of the retreat obstacle, ∞>G>1 would not happen in the industry.
Only G (∞) tends to happen in the real-world situation and therefore tends to rely on the “promote” strategy (i.e. promote, promote) = (8,
5). Therefore, in the static game, the pure price competition drives both of them to push the promotion strategy to gain profits of their
own. Due to the market share ratio of C and F Corporation is 10:6 and both of two-parties are non-promote. Function of the model can be
demonstrated as follows:
P=30-10q1-6q2
Because of the cost of crude oil keeps rising, the fluctuation of fuel retail price stirred up end-user’s price sensitivity. The game would
change from the pure price competition in static game to duopoly quantity competition which can be solved by Cournot Game. The
market potential needs are 30 hundred million dollars. Both of C and F Corporation are non-promote, and profit gaining ratio of the
market share they own is 10:6. Formula 1, 2, 3 and 4 are shown in the following can be used to solve the situation:
Cournot Game (q1, q2)
π1 (q1, q2) = (30-6q1-10q2) q1…………………………………………………………………….…..[1]
π2 (q1, q2) = (30-6q1-10q2) q2…………………………………………………………….…………..[2]
 1
 30  12q1  10q 2 … …………………………………………………….……………..[3]
q1
2
 30  6q1  20q 2 ………………………………………………………………..……..[4]
q 2
Solve: q1=1.67; q2=1
π1 = 16.67 π2 = 9.98
According to the Cournot Game, both C and F Corporation are non-promote, we can know that C Corp. can gain profits of 16.67 hundred
million whereas F Corp. can gain 9.98 hundred million. If the two parties decide to promote to their retailer (gas station), their retailers of
both parties would also decide to promote. The market share ratio would return back to 8:5. Assume that q1 as demand of C corp. and q2
as demand of F corp., while both of the two parties promote, the game model of the profits can be displayed as follows:
P=30-5q1*-8q2*
Cournot Game (q1*, q2*)
π1 (q1*, q2*) = (30-5q1-8q2) q1
π2 (q1*, q*2) = (30-5q1-8q2) q2
4
 1
 30  10q1  8q 2
q1
2
 30  5q1  16q 2
q 2
Solve: q1*= 2; q2*= 1.25
π1*= 20 π2* = 12.5
From the result of Cournot Games, C corp. and F corp. both decide to promote in the market. All of their retailer obey their policy of
promotion, and thus C corp. can get profits of 2 hundred million and F corp. get 1.25 hundred million.
Mutation of Game
Through the fluctuation of crude oil prices, gas stations would make various kinds of promotion. A number of gas stations try to build up
their own brand or join an alliance to increase purchase quantity then ask for more discounts from their suppliers. Therefore, they are
using quantity discount advantages to acquire lower-price oil for sale. The quantity discount advantages can afford a flexible strategy
thus making space. For example, a slight profit leads to a larger quantity of sales. So, the game changed from static to dynamic.
We will solve this problem from the perspective of Cournot Game. Both the retailers belong to the C & F corp. They chose to promote a
strategy, and then earned a 20 and 12.5 hundred million profit relatively. But, not all of their retailers follow the C & F corp. strategy.
Partial gas stations are tending to increase extra promotion activities. So, it looks like an incomplete dynamic information signaling game.
The probability that information will get into the game should be considered. Therefore, the Probability Bayesian Equilibrium, (P.B.E.) is
able to be used to solve the dynamic game.
(8,5)
p=0.5
F1
np=0.5
(8,6)
p=0.9
p
Cr1
Fr1
np=0.1
p=0.5
(12,2)
C
(9,3)
p
np=0.5
Cr2
np
p=0.5
(4,8)
F2
p=0.7
np=0.5
p=0.3
Fr2
(9,6)
np=0.3
(14,1)
Cr3
np=0.7
p=0.4
Fr3
(6,10)
np=0.6
(10,6)
Fig. 1 Game Tree
Denote: C: C corp.; F: F corp.; Cr: Retailer of C corp.; Fr: Retailer of F corp.
In this game, the market base of petroleum C corp. is larger than F. corp. C corp., as the first mover in the game, signaled whether or not
5
to promote no. F corp. After they referred to the signal and make their decision.
According to the expert estimates for market base, if and when C corp. chooses to use “promote strategy”, then F corp. also chooses the
“promote strategy” is 0.8. The odds that F corp. will choose the “non-promote strategy” is 0.2. In the situation of both C and F. corp.
would choose the “promote strategy”, all of gas stations will hold an extra promotion activity, is 8.5. So, the market share ratio was still
maintained in 8:5. In the situation of C corp. promote and F corp. non-promote. All of the gas stations that belong to C corp. followed the
strategy as a simultaneous Game. At this time, the ratio of F. corp. gas station were whether or not they promote were 0.9 and 0.1.
The probability that the C corp. did not promote and the F corp. chose to promote was 0.3 while the probability of the two corporations
that did not choose to promote was 0.7. If the F corp. chose to promote, the gas stations belonging to the C corp. can choose to promote
or not. If the gas stations belonging to the C corp. chose extra promotion strategies to compete with the gas stations belonging to the F
corp., the market share ratio of C and F corp. will be shown as 9:3. If the gas stations belonging to the C corp. choose the
“non-promotion strategy”, the market share ratio of C and F corp. has been estimated 4:8. If the C corp. and the F corp. adopt the same
strategy as promotion with equal price, then competition of price would affect the market share among C corp. and F corp.’s gas stations.
The strategies that these gas stations adopted simultaneously occurred in the fuel market. In that situation wherein they both chose to
promote, the market share was 9:6. If they both chose to promote, the market share would be 10:6. If gas stations belonging to the C corp.
chose to promote and gas stations of the F corp. chose not to promote, the market share would be 14:1. If gas stations of the F corp. chose
to promote and the C corp.’s gas stations chose non-promote strategies, the market share was 6:10. Refer to the Backward Induction, the
strategies that the gas stations of the C corp. and the F corp. adopted could be explained in the following steps:
Perspective of C corp.
The probability Bayesian law and Backward Induction have been used to analyze in the following formula:
(1).The solve of the C corp. chooses promote strategy:
prob.( player.C / p) 
p(C p)
p( p)

p(C p)
p(C  p)  p( F  p)

p(C ) * p( p / C )
p(C ) * p( p / C )  p( F ) * p( p / F )
8
* 0.5
8
64
13
p(C / p) 


 0.615384
8
5
13 104
* 0.5  * 0.5
13
13
(2).The solve while C corp. chooses non-promote strategy:
prob.( player.C / np) 
p(C  np)
p(np)

p(C np)
p(C  np)  p( F  np)

p(C ) * p(np / C )
p(C ) * p(np / C )  p( F ) * p(np / F )
10
* 0.5
5 40
16
p(C / np) 
 
 0.384615
10
6
8 104
* 0.5  * 0.5
16
16
(3).The solve while C corp. chooses non-promote strategy. But, theirs gas station do not obey the strategy:
prob.( player .C / np) ( player .Cr / p) 

p(C np)
p(np)

p(Cr p)
p( p  np)

p(C np)  p(Cr p)
p(C np)  p( F  np)
p(C ) * p(np / C )  p(Cr ) * p( p / Cr )
p(C ) * p(np / C )  p( F ) * p(np / F )
14
* 0.3 * 0.3
40
40 0.084
15
p(C / np) p(Cr / p) 



 0.384615  0.4  0.785615
9
104 14
104 0.21
* 0.3 * 0.3  * 0.7 * 0.3
15
15
(4).The solve while C corp. chooses non-promote strategy. But, theirs gas station obey the strategy:
prob.( player .C / np) ( player .Cr / np) 

p(C np)
p(np)

p(C ) * p(np / C )  p(Cr ) * p(np / Cr )
p(C ) * p(np / C )  p( F ) * p(np / F )
6
p(Cr np)
p( p  np)

p(C  np)  p(Cr np)
p(C np)  p( F  np)
6
* 0.4 * 0.7
40
40
0.105
16
p(C / np) p(Cr / np)  p( Fr / p) 



10
104 6
104 0.3675
* 0.4 * 0.7  * 0.6 * 0.7
16
16
 0.384615  0.285714  0.098901
Perspective of F corp.
The probability Bayesian law and Backward Induction have been used for analyze the formula as follows:
(1).The solve while F corp. chooses promotion strategy:
prob.( player .F / p) 
p( F  p)
p( p)

p( F  p)
p(C p)  p( F  p)

p( F ) * p( p / F )
p(C ) * p( p / C )  p( F ) * p( p / F )
5
* 0.5
13
p( F / p) 
 5 / 13  65 / 104  0.625
8
5
* 0.5  * 0.5
13
13
(2).The solve while C corp. chooses non-promotion strategy and F corp. chooses non-promotion strategy:
prob.( player .F / np) 
p( F  np)
p(np)

p( F  np)
p(C np)  p( F  np)

p( F ) * p(np / F )
p(C ) * p(np / C )  p( F ) * p(np / F )
6
* 0.5
16
p( F / np) 
 3 / 8  39 / 104  0.375
10
6
* 0.5  * 0.5
16
16
(3).The solve while C corp. and theirs gas stations chooses non-promotion strategy. F corp. chooses non-promotion strategy. But, theirs
gas station did not obey the strategy:
prob.( player .F / np) ( player.Fr / p) 

p( F  np)
p(np)
p( Fr p)

p( p  np)

p( F  np)  p( Fr p)
p(C np)  p( F  np)
p( F ) * p(np / F )  p( Fr ) * p( p / Fr )
p(C ) * p(np / C )  p( F ) * p(np / F )
10
* 0.4 * 0.7
39
39
0.175
16
p( F / np) p( Fr / p) 



6
104 10
104 0.1575
* 0.4 * 0.7  * 0.6 * 0.7
16
16
 0.375  1.111111  1.486111
(4).The solve while F corp. and theirs gas stations chooses non-promote strategy. F corp. chooses non-promote strategy. But, C corp. gas
stations used promotion strategy:
prob.( player .F / np) ( player .Fr / np) 

p( F  np)
p(np)

p( F ) * p(np / F )  p( Fr ) * p(np / Fr )
p(C ) * p(np / C )  p( F ) * p(np / F )
7
p( Fr np)
p( p  np)

p( F  np)  p( Fr np)
p(C np)  p( F  np)
1
* 0.3 * 0.3
39
39 0.006
15
p( F / np) p( Fr / np) 



6
104 1
104 0.168
* 0.3 * 0.3  * 0.6 * 0.7
15
15
 0.375  0.035714  0.339286
The payoff interaction between two parties
C corp. has provided the decision information and game induction which shows that while C corp. choose “promotion strategy”, that had
a solution rate of 0.615384, which indeed is higher than non-promote solution 0.384615, the effect of gas station’s strategy affected both
the two parties without either one significantly gaining on the other. If the gas stations belong to C corp. used “promote strategy” and F
corp. did not use this, then there is a solution rating of 0.785615. If the gas stations belong F corp. choose non-promote, then there is a
solution 0.098901. According to the above information we can know that if the gas stations belong to C corp. promote and the gas
stations belong F corp. non-promote, was the best strategy situation. Because we can be observe how the promote strategy effects C
corp.’s and gas stations’ profit. They can calculate that the promotion strategy effect is 0.785615－0.384615＝0.401; The effect
compared with just C corp. promote is 0.615384－0.384615＝0.230769. So, C corp. should transfer original promote strategy decision to
non-promote. So, the promote act would be just used by gas stations which belong to the C corp. Inductive base the logic, F corp. provide
decision information and game strategy show, while F corp. choose promote strategy to solve is 0.625. Indeed, the effect are higher than
non-promote solve 0.375. But, both of two parties gas stations used promote strategy while their fuel provider do not promote. The C
corp.’s gas station got 1.486111 and the F corp. gas stations got 0.339286. observing the game from the F corp. view point, while gas
stations which belong to F corp. used promote strategy make the payoff change, the effect is 1.486111－0.375＝1.111111 the effect
higher than F corp. promote strategy 0.625－0.375＝0.25; so, F corp. would transfer the use of strategy from promote to non-promote.
Therefore, only the gas stations that belong F corp. used the “promote system”. The equilibrium of game was changed by both of two
parties to promote strategy. From strategy set（promote, promote）transfer to（non-promote, non-promote）.
CONCLUSION
The phenomena that the mechanism of free petroleum trade market serves as the first stage of the change could be observed in our daily
lives. A situation wherein both of the petroleum corporations are fully controlled by their gas stations could be named as static game
environment. Through vibration of the crude oil price and the effects of promotion strategies within the field, the promotion act adopted
by brokers (gas stations between oil provider and consumer) effect as larger as than before. Inductive from dynamic game, the result
differ from intuition. Promote by oil provider would not be able to get larger profit than non-promote while theirs gas station have
individual decision making power. From the inductive process we can know, there are two main oil providers in the market (C corp. and
F corp.) and the gas stations they own, have their own brand concept and the decisions to face competitor’s strategy. Therefore, while the
two main oil providers do not need to use the promotion strategy, their gas stations were plus more extra promotion for consumer. Both
fuel providers just waited and observed their retailers promote competition. That would be the strategy they should adopt in the long term.
The whole seller price just reflects the crude oil costs and does not consider the impact from crude oil cost raise may affect oil provider’s
profit. The market leader just keep maintain the market share. It would be the adoptive strategy.
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