Game Theory

The Right Game: Use
Game Theory to Shape
Strategy
by Adam M. Brandenburger and Barry J. Nalebuff
Harvard Business Review
Reprint 95402
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The Right Game: Use Game
Theory to Shape Strategy
by Adam M. Brandenburger and Barry J. Nalebuff
published their book
Theory of Games and Eco-
Business is a high-stakes game. The way we ap-
nomic Behavior
. Immediately heralded as one of
proach this game is reflected in the language we use
the greatest scientific achievements of the century,
to describe it. Business language is full of expres-
their work provided a systematic way to under-
sions borrowed from the military and from sports.
Some of them are dangerously misleading. Unlike
stand the behavior of players in situations where
war and sports, business is not about winning and
their fortunes are interdependent. Von Neumann
losing. Nor is it about how well you play the game.
and Morgenstern distinguished two types of games.
Companies can succeed spectacularly without re-
In the first type, rule-based games, players interact
quiring others to fail. And they can fail miserably
according to specified “rules of engagement.”
These rules might come from contracts, loan
no matter how well they play if they make the mis-
covenants, or trade agreements, for example. In the
take of playing the wrong game.
second type, freewheeling games, players interact
The essence of business success lies in making
without any external constraints. For example,
sure you’re playing the right game. How do you
buyers and sellers may create value by transacting
know if it’s the right game? What can you do about
in an unstructured fashion. Business is a complex
it if it’s the wrong game? To help managers answer
mix of both types of games.
those questions, we’ve developed a framework that
draws on the insights of game theory. After 50 years
Adam M. Brandenburger is an associate professor at the
as a mathematical construct, game... [continues]

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