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Why pacquiao is fighting mayweather next using nash equilibrium

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  • Why pacquiao is fighting mayweather next using nash equilibrium

    This is a one-player simulation of Bob Arum and his pending choices.

    Pacquiao has the following options:

    (1) Rematch Marquez
    (2) Fight Mayweather
    (3) Fight someone else
    (4) Retire

    If (1), here are the consequences;

    > Pacquiao and TR will generate a medium revenue purse
    > Pacquiao and TR will be under relative scrutiny
    > Pacquiao has a medium chance of losing
    > If Pacquiao loses, a megafight with Mayweather loses most of it's appeal (i.e incurring substantial revenue loss)
    > If Pacquiao wins, a megafight with Mayweather is still appealing

    If (2), here are the consequences;

    > Pacquiao and TR will generate a substantially large revenue purse
    > Pacquiao has a relatively high chance of losing
    > If Pacquiao loses, he would be still relatively marketable
    > If Pacquiao wins, he would be presently the most marketable boxer
    > If the fight is close, revenue could essentially be doubled due to a rematch clause

    If (3), here are the consequences

    > Pacquiao and TR will under high scrutiny
    > Pacquiao has a high chance of winning (the fight)
    > The purse will be relatively low

    If (4) here are the consequences

    > Pacquiao generates no more revenue as a prize fighter

    ---

    Application:

    (1) Pacquiao has a medium possibility of losing, Arum doesn't the balls to rematch Marquez and risk the megafight purse with Floyd

    (2) Pacquiao will likely lose, however he will still be marketable and the rematch clause is extremely attractive

    (3) Pacquiao and TR will be under jepardy if they take this option. It is not economically viable

    (4) Arum loses his cash cow. It is not economically viable
    ---

    Conclusion:

    (2) is most likely. It should be noted that I've used assumptions in this game simulation (e.g. Pacquiao is willing to take the tests, Floyd is willing to fight Pacquiao). If my assumptions were fallacious, my simulation could lead to inaccuracies.
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