What is Strategic Behaviour?
The following few pages provide an overview of the course, Strategic Game Theory for Managers. How should people behave in society? Our answer does not deal with ethics or etiquette. Nor do we aim to compete with philosophers, preachers, or even Emily Post. Our theme, although less lofty, affects the lives of all of us just as much as do morality and manners. This course is about strategic behavior. All of us are strategists, whether we like it or not. It is better to be a good strategist than a bad one, and this course aims to help you improve your skills at discovering and using effective strategies. Work, even social life, is a constant stream of decisions. What career to follow, how to manage a business, whom to marry, how to bring up children, whether to stand for election, are just some examples of such fateful choices. The common element in these situations is that you do not act in a vacuum. Instead, you are surrounded by active decision-makers whose choices interact with yours. This interaction has an important effect on your thinking and actions. To illustrate the point, think of the difference between the decisions of a logger and those of a general. When the logger decides how to chop wood, he does not expect the wood to ﬁght back; his environment is neutral. But when the general tries to cut down the enemy’s army, he must anticipate and overcome resistance to his plans. Like the general, you must recognize that your business rivals, prospective spouse, and even your child are intelligent and purposive people. Their aims often conﬂict with yours, but they include some potential allies. Your own choice must allow for the conﬂict, and utilize the cooperation. Such interactive decisions are called strategic and the plan of ¨ action appropriate to them is called a strategy. This course aims to help you think strategically, and then translate these thoughts into action. The branch of social science that studies strategic decision-making is called game theory. The games in this theory range from chess to child-rearing, from tennis to takeovers, and from advertising to arms control. As the Hungarian humorist George Mikes expressed it, “Many continentals think life is a game; the English think cricket is a game.” We think both are right. Playing these games requires many different kinds of skills. Basic skills, such as shooting ability in basketball, knowledge of precedents in law, or a blank face in poker, are one kind; strategic thinking is another. Strategic thinking starts with your basic skills, and considers how best to use them. Knowing the law, you must decide the strategy for defending your client. Knowing how well your team can pass or run, and how well the other team can defend against each choice, your decision as the coach is whether to pass or to run. Sometimes, as in the case of superpowers contemplating an adventure that risks nuclear war, strategic thinking also means knowing when not to play. Our aim is to improve your strategy I.Q. But we have not tried to provide a course
of recipes for strategies. We develop the ideas and principles of strategic thinking; to apply them to a speciﬁc situation you face and to ﬁnd the right choice there, you will have to do some more work. This is because the speciﬁcs of each situation are likely to differ in some signiﬁcant aspects, and any general prescriptions for action we might give could be misleading. In each situation, you will have to pull together principles of good strategy we discuss, and also other principles from other considerations. You must combine them and, where they conﬂict with each other, evaluate the relative strengths of the different arguments. We cannot solve every question you might have. The science of game theory is far from being complete, and in some ways strategic thinking remains an art. We do provide guidance for translating the ideas into action. We begin by...