Chapter 12

Game Theory: Fun Only if You Win

In This Chapter

arrow Playing to win

arrow Taking turns

arrow Playing forever

arrow Losing by winning with prisoner’s dilemma

arrow Winning by losing through preemptive strategies

arrow Committing with credibility

Finally, some fun. You get to play games, and you’ve probably heard the saying, “It’s not whether you win or lose; it’s how you play the game.” A critical point for business that this quote misses is how you play the game determines whether you win or lose. And in business, whether you win — make profit — or lose — incur losses — means everything.

Strategic decision-making occurs when the game’s outcomes depend on the choices made by different players. Because the outcomes are interdependent, players must consider how rivals respond to their decisions. Competition in these situations leads to mutual interdependence with conflict. The complexity of the resulting environment ...

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