Competition Analysis and Pricing

Project Aim

• Understand the importance of competition analysis in any market segment
• Ability to use the mathematics of Game Theory and apply it effectively in Competition analysis
• Implement game theory model in a business environment

Members

• Aaron George
• Shishir Volety
• R Aswin
• Aditya Reddy
• Shreyank R

Work Done

• Understanding game theory and its applications in the business environment
• Test implement in on Mid-Range smartphone segment
• Perform qualitative and quantitative analysis on the market competitors
• Implementation on a volatile market like Blockchain and Cryptocurrencies
• Derive insights from the game-theory model

Future Scope

The use of Nash equilibrium and game theory is still being tested at ground level. This work tries to implement game theory into a very specific market and check its functionality. The scope for this work in would be limited but the applications of similar models in the competitive world are immensely underrated.

Detailed Report on Competition Analysis and Pricing

Introduction

Competitor analysis in marketing and strategic management is an assessment of the strengths and weaknesses of current and potential competitors. This analysis provides both an offensive and defensive strategic context to identify opportunities and threats. Profiling combines all of the relevant sources of competitor analysis into one framework in the support of efficient and effective strategy formulation, implementation, monitoring and adjustment.

Competitor analysis is an essential component of corporate strategy. It is argued that most firms do not conduct this type of analysis systematically enough. Instead, many enterprises operate on what is called "informal impressions, conjectures, and intuition gained through the tidbits of information about competitors every manager continually receives." As a result, traditional environmental scanning places many firms at risk of dangerous competitive blind spots due to a lack of robust competitor analysis.

Game theory is the study of the ways in which interacting choices of economic agents produce outcomes with respect to the preferences (or utilities) of those agents, where the outcomes in question might have been intended by none of the agents.

We model the competition over mining resources and over several cryptocurrencies as a non-cooperative game. Leveraging results about congestion games, we establish conditions for the existence of pure Nash equilibria and provide efficient algorithms for finding such equilibria. We account for multiple system models, varying according to the way that mining resources are allocated and shared and according to the granularity at which mining puzzle complexity is adjusted. When constraints on resources are included, the resulting game is a constrained resource allocation game for which we characterize a normalized Nash equilibrium. Under the proposed models, we provide structural properties of the corresponding types of equilibrium, e.g., establishing conditions under which at most two mining infrastructures will be active or under which no miners will have incentives to mine a given cryptocurrency.

Analysis

The chosen 2 competitors are Bitmain and Canaan Creative.

Qualitative Analysis

Quantitative Analysis

Game Theory Model & Conclusions

In the end of 2013, as regulation on bitcoin was tightening up, bitcoin price plummeted and the fantasy of bitcoin bubble has burst. It marked the beginning of a 3-year bear market for bitcoin.

Both N.G. Zhang and Jihan Wu have just entered this field and they were deeply bothered by the situation. N.G. Zhang is more like an IT nerd; he is obsessed with the technical details. While Jihan Wu, is a typical businessman.

He believed that the depression for crypto prices is an opportunity for crypto mining market. He did what he believed in since 2014. Bitmain has launched four versions of ant miners in 2054, form S2 in April to S5 in December. In August, 2015, Bitmain has launched ant miner S7 embedded with BM1383 chip which marked a milestone for Bitmain.

With the help of S7, Bitmain built its dominance in bitcoin mining industry. They made a 400 million RMB profits out of S7 sale. All these happened in the bear market. When the bitcoin winter ended, Jihan Wu has become unstoppable and only N.G.Zhang can keep competing with him.

Jihan Wu's journey did not end here. His ambition is much bigger. Bitmain has gained much hashpower in bitcoin network through different mining pools around the globe. Bitmain launched Antpool, BTC.com and invested in ViaBTC, with these three mining pools, Bitmain has mastered 49.6w of the total hashpower of bitcoin network.

It means Jihan Wu can easily launch a 51% attack on bitcoin network.

The creation of BCH is a reflection of his dominance in bitcoin community.

N.G. Zhang recovered from bear market as well and led his Canaan Creative in a different path, a more pragmatic path. Canaan Creative tried to get listed in Shanghai Exchange as a chip designer. But that path is not an easy one for them.

In the end, Canaan decided to IPO in Hong Kong and that's what they are working on right now. Canaan Creative chose a different path and focused on the manufacturing. Aside from miner production, they basically had nothing to do with crypto community. They are more like obeying and protecting the current rule of the financial world.

Today, decentralized blockchain community has become a totally different thing from early days and is extremely centralized. Iit is an inevitable transition for blockchain and an ultimate decentralization will come in the end.

Demo Video