Deming and Cooperation

Topics: Game theory, Economics, Nash equilibrium Pages: 11 (4680 words) Published: February 10, 2014
ANALYZING DEMING IN THE CONTEXT OF GAME THEORY

Abstract
The objective of formulating business decisions within the context of game theory is to generate “wins” with no negative consequences in a multilevel, multiplayer business environment. This can be easily done with cooperation between corporations. When both players “win”, neither feels the need to retaliate against the other and the most total good is created. However, such cooperation is often impossible or not in one’s best interest. The Deming based approach would be to change the rules of the game until a system is implemented in which all players along the supply chain are working together towards a common goal. Winning in business and in life necessitates changes to how one thinks about cooperation and reward. This paper will discuss the moral and financial implications of cooperation and competition in business as demonstrated in game theory. One may say that there is a moral imperative to treat other well and not benefit at another’s expense. This directive is certainly well meaning, however, it may interfere with the best possible good for a person. At what point, if ever, does the moral imperative of fair play and cooperation detract from financial gain? It would be nice to think that there will be in all situations a benefit to cooperation as opposed to competition, but that has historically been shown not to be so. One needs a realistic rather than idealistic model to which he can adhere; otherwise, such directives lose their empirical necessity and become nothing more than academic speculation. Game theory sets forth a series of parameters for persons to consider when trying to maximize one’s personal benefit while making sure that the long term success of a company and a society are ensured.  

Game Theory Introduction
Game theory states that rational players will act rationally in their best interest. In any situation where there are several possible future outcomes, game theory comes into play. It is key towards understanding any action taken by any person. Neither the assumption of rationality nor the assumption of self-interest is universally inviolable, but to assume otherwise would nullify any sort of behavioral theorizing. To assume that people act consistently irrationally and without considering any future benefit on their end would be absurd. Not only is game theory paramount in understanding decisions, it is also key to Deming’s theories. Deming’s management philosophy is built on reason and thus is ideal to build upon the foundations of game theory. The two assumptions without which game theory would fall apart are that humans are rational and act in their own self-interest. Deming necessitated that one must be aware of the structures within an organization and the choices that those systems leave open to those working within that organization. He assumes that people are rational and act in their own self-interest. When both those assumptions are correct, and a situation does not resolve itself the way in which one would expect, one needs to consider the systems in place that shape the situation. Changing the system would be better in many cases than leaving economics and management up to dumb luck. Game theory teaches us how people act when faced with options and Deming teaches us how to reevaluate the institutions, how and why they make people act in such ways. There are two basic kinds of games, simultaneous and consecutive. In a consecutive game there are a series of rounds and each player makes his decision based on the information available at that moment as well as what he has learned in the past rounds. In a simultaneous game, there are several choices and each player chooses at the same time as every other. After that round, there is no possibility of retaliation. Both have different implications in the real world and different strategies for success.

Deming’s Theories: When Rational...
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