2. Game theory-based business strategy

Strategy+Business Spring 2007

Game theory is the science of interactions. A mathematical tool to anticipate possible scanarios and develop appropriate strategies to deal with them.

Applying game theory in business decisions
1. write down and categorize all the elements of the game: the playersk rules (e.g. laws and government regulations), people's perceptions, the boundaries of the game (the market) and the linkages among all the elements.

2. The playper spells out the consequences of a change to any of the elements.

3. The action is in changing the game rather than playing games.

4. A company must understand the nature of its leverage in order to play or change the game.

5. Shake company from their complacency and cynicism and help them to generate new ideas. How can we do things differently and better?

6. Barry Nalebuff describes 4 essential techniques to promte innovation and idea generation in his consulting work and in the classroom.

6.1 Look at a problem from the point of view of a person with all the power and money in the world - a person without constraints. Look at his customer and how he would solve the problem and then go and make it practical.

6.2 To look where incentives are poorly designed and correct the problem.

6.3 Turning things upside down. Coffee into milk -- saves on countelss plastic stirrers and money. Priceline.com gave power to buyers, not sellers, saving $1+ billion company in the process.

6.4 Asking where else a product or an idea could work. Has it worked in other countries or industries? What can you learn from other people's investments? Find the right problem that their existing answer had already solved.

Use game theory to preempt a competitor's next move or respond in a way that benefits one's business.


Honest Tea brew its products from whole leaves. Firm with the lowest price or best product will capture the market. But inertia is a powerful force to overcome.

3 books by Barry Nalebuff et al
1. Co-opetition. The Game Theory Strategy that's changing the game of business.
2. Thinking strategically: How to apply game theory to problems of all sorts, including those in business
3. Why not? How to use everyday ingenuity to solve problesm big and small. A guide to automating the process of innovation.

1. Contents --- Jun 2, 2007

1. Story telling - narrative non-fiction

1.1 Beginning --- Singapore culture.
1.2 Middle
1.3 End. Re-homing.
1.4 Audience, plot, characterisation, hero, enemy.

2. Humour
2.1 Cleanliness Freak
2.2 Guilty Conscience
2.3 Whining
2.4 Independent streak. Pick up your own toys. Make your bed.
2.5 Control Freak
2.6 Empty vessels make the most noise
2.7 Regress
2.8 Vengefulness --- Separation Anxiety. Phobias.

3. Conflicts
3.1 Time pressed. No time.
3.2 Bureaucratic Landlords
3.3 Explosion
3.4 Virus and bacteria.
3.5 Deep vein thrombosis.
3.6 Negative reinforcement training
3.7 Elderly mum's burdens -
3.7.1 Working mum's burdens - Rachel's chihuahua
3.8 Rebellion. Talking back. Biting the hand that feeds you.
3.9 After midnight barking.
3.10 Wetting the pants --- Submissive urination, Excitation urination.
3.11 Eating stools, drinking urine
3.12 Poop a bit here and there. Pee a bit here and there.
3.13 Shredding
3.14 Small children and neighbours.
3.15 Veterinary costs
3.16 Child dog phobia.
3.17 Old dog and young pup.
3.18 Two young pups.
3.19 Maids.

4. Equipment needed.
4.1 Restricted zone.
4.2 Red light.
4.3 Carrot and stick method. Spanking.
4.4 Male hormones.