SlideShare ist ein Scribd-Unternehmen logo
1 von 36
Downloaden Sie, um offline zu lesen
Game theory and strategy (PCA16, PCATX)
2
Sponsors
Advocates
In Kind
Supporters
What?
• A primer on basic game theory concepts
– Basic
– We try to avoid math
– If you know a lot about Game Theory already, you
may get bored
• A discussion on applying game theoretic
concepts to product strategy
Why?
• I think Game Theory is Fun!
• Interesting and illuminating perspective on
behavior of both people and firms
• Analytical toolset for competitive scenarios
Who?
• From Israel
• Student of Behavior and Business
• GTM Consultant for multiple startups
• Previously PdM and Strategist in Dell and
EMC and a variety of software development
roles
• Winner of the non existent “crappiest slide in
PCA15” award
Agenda
• What is Game Theory?
• A Few Games and Business Analogies
– Rock, Paper, Scissors:
• Zero-sum, symmetric game
– Prisoner’s Dilemma:
• Pricing, market entry, volume
• Iterated Prisoner’s Dilemma: TFT
• Collusion/Cooperation in IPD – cartels
– Chicken and the Value of Commitments
• Investment, market entry
What is Game Theory?
• Mathematical discipline designed to answer questions
like:
– You are playing Rock Paper Scissors. Which do you choose?
– Can some games be “solved”? (Tic Tac Toe, Chess, Go?)
– Should we build more nuclear weapons in the cold war or
less? How do we ensure that a disarmament agreement is
enforceable?
• Developed mathematically by Von Neumann (of the
Manhattan Project fame), Nash (Of “A Beautiful Mind”
fame), and Morgenstern (not as famous, but definitely
deserves props) during 40s and 50s.
So, what does that have to do with
me?
• You sell a product that is very similar to your
competitor. Do you:
– Price low to steal his customers?
– Price the same?
– Price higher?
• You need to invest in a factory to create your product
• You open a gas station – should you locate it across the
street from your competition or the other side of
town?
– Who can give an example of something more tech-y that is
gas-station-esque?
Types of Games
• Sequential vs. Simultaneous
– Sequential: Chess, Checkers, Tic-Tac-Toe
• Solvable
• Game tree solution
– Simultaneous: Rock Paper Scissors
• Solvable
• Equilibria solutions
• Most business problems are simultaneous (or very close to
it) rather than sequential
• Our focus will be simultaneous, 2 player games
Brain Teaser – Cut the Cake
• Two twin brothers have gotten a cake from
their parents for their birthday.
• What is the best way for them to split it so
they are both happy?
Rock, Paper, Scissors
This is a game
Rock Paper Scissors
Rock 0 , 0 -1 , 1 1 , -1
Paper 1 , -1 0 , 0 -1 , 1
Scissors -1, 1 1 , -1 0 , 0
So how do I read it?
• The first number in each
pair is the payout for the
row player – the second is
for the column
So, who cares?
• This is a boring game – but
it’s here as an example for
more interesting ones
• Still – interesting to note:
– Symmetric
– Zero Sum
Rock, Paper, Scissors
Rock Paper Scissors
Rock 0 , 0 -1 , 1 1 , -1
Paper 1 , -1 0 , 0 -1 , 1
Scissors -1, 1 1 , -1 0 , 0
So, again, I ask, who cares?
• RPS is a classic example for
a zero sum, symmetric
game
– Zero sum: Winning is done at
the expense of the loser
– Symmetric: Identical options
with identical payoffs exist to
all players
Let’s Play!
Find a partner – and play Rock, Paper, Scissors!
Rock Paper Scissors
Rock 0 , 0 -1 , 1 1 , -1
Paper 1 , -1 0 , 0 -1 , 1
Scissors -1, 1 1 , -1 0 , 0
What have we learned?
• Does RPS have much in common with real
business problems?
• What’s the best strategy for playing RPS?
Prisoner’s Dilemma
• A classic!
• Probably most famous game in Game Theory
• We are going to spend some time here, so get
comfy
So, what’s the big deal?
(positive
payoffs are
desirable)
Shut
up
Snitch!
Shut
up
3 , 3 0 , 5
Snitch! 5 , 0 1 , 1
• Two burglars are busted
and put in separate
rooms
• Police interrogate and
promise the first one to
snitch a deal
• Now, things get
interesting.
• What would you do?
Equilibrium
(positive
payoffs are
desirable)
Shut
up
Snitch!
Shut
up
3 , 3 0 , 5
Snitch! 5 , 0 1 , 1
• The problem should be
clear
• Everyone would be better
off shutting up – but each
individual would rather
snitch
• Therefore, the Nash
Equilibrium (and therefore
the result of the game if
played by rational, payoff
maximizing players) is the
sub optimal bottom right
corner
What does PD apply to?
• Can you think of any real life scenario in which
PD applies to?
A ton of them!
• Pricing/Promotions: We are selling a similar
product; should I price low (and then steal share)
or high?
– http://www.businessweek.com/articles/2013-11-
19/best-buy-and-the-holiday-retail-prisoners-dilemma
• “Feature Wars”
• In fact, most non-zero sum games in which
cooperation yields more benefits than competing
can be modeled like a PD game
So what do we do?
• The bad news: The solution to a standard,
“pure” Prisoner’s Dilemma game is always
mutual defection. Sorry. It’s a cruel world.
• The good news: Reality is infinitely more
complex; there are factors we can explore and
ways to “change the game”
– IPD
– Collusion (don’t do that!)
– Change the Game
Let’s try something
• Pick your gaming partner
• Play the game!
(positive
payoffs are
desirable)
Shut
up
Snitch!
Shut
up
3 , 3 0 , 5
Snitch! 5 , 0 1 , 1
Show of Hands
• Who picked snitching? Why?
• Who picked shutting up? Why?
And now, a Twist!
• Play the game again.
• And again.
• And again.
• Until I tell you to stop.
Iterated Prisoner’s Dilemma
• An interesting result emerges when playing PD
multiple times. Why?
• What if I told you that you had exactly 100 turns
to play?
• Strategies: TFT, TF2TT
• Axelrod’s Successful Strategy:
– Clear
– Provocable
– Nice
– Forgiving
Collusion
Careful! I’m not a lawyer, but usually, this is illegal 
Excerpt from Cramton & Schwartz 2002 – see table 1 at
http://drum.lib.umd.edu/bitstream/1903/7061/1/cramton-schwartz-collusive-bidding.pdf
(can’t put table here for copyright reasons)
Change the Game
• What are other options to change the game?
• What if you locked the loot from the burglary
with two keys?
• Examples from a Product Strategy perspective:
– Differentiation
– Consortiums (pooled standard ownership for IP)
– Punitive clauses in contracts
– Price matching clauses (retroactive ones as well)
– Most favored customer clauses
Let’s Play Chicken!
Swerve Drive on!
Swerve Lose (-1) ,
Lose (-1)
Lose (-1),
Win (1)
Drive on! Win (1), Lose
(-1)
Splat! (-3) ,
Splat! (-3)
• Anti-cooperation game
• What are business
analogies?
• How can you win?
The Factory Game (A version of
Chicken)
• What’s the Nash
equilibrium?
• How do you win?
Build Not Build
Build Competition
: 1, 1
Monopoly: 2,
0
Not
Build
Monopoly:
0, 2
Nothing: 0, 0
Some interesting questions if we have
time left
• You need to bid on ad keywords. Are you
better off having keywords that are identical,
or different from your competition?
• Do you think it’s better to ape your
competitors features or remove them
entirely?
• When you build a store location – would you
rather build it next to your competitor, or
somewhere else?
Hotelling’s Problem – or why
Differentiation doesn’t always Work
The setting – the beach; the adversaries – two hot
dog cart vendors.
• Where should they place their carts?
• What is the socially optimal placement?
• What is the actual equilibrium?
• Why do I care?
Differentiation only matters when it’s difficult or costly to copy
Do We Have Time for One More?
• This is a game called “Keynesian Beauty
Contest”
• The story is that of a beauty contest: Given
faces published in a newspaper, pick the
prettiest face. The winner is the one who
picked the most popular face.
• We’ll model this here in a variant.
Pick a card, any card
• The options are numbers from 1-10
• The winner is the person who guesses closest
to 2/3 of the average
• Ready? Go!
Either scan the QR code with a QR
code scanning up – go to :
http://shortn.me/kFiK
Or text: GAMES to (952) 649-5350
Thank you!
34
Sponsors
Advocates
In Kind
Supporters
Backup
Further Reading
• Art of Strategy: Dixit & Nalebuff
• Evolution of Cooperation: Axelrod
• Prisoner’s Dilemma: Poundstone
• Coursera: Game Theory, Advanced Game
Theory

Weitere ähnliche Inhalte

Was ist angesagt?

Was ist angesagt? (20)

Game theory
Game theoryGame theory
Game theory
 
Game theory
Game theoryGame theory
Game theory
 
Game theory in Economics
Game theory in EconomicsGame theory in Economics
Game theory in Economics
 
Game theory
Game theoryGame theory
Game theory
 
Introduction to Game Theory
Introduction to Game TheoryIntroduction to Game Theory
Introduction to Game Theory
 
Game theory
Game theoryGame theory
Game theory
 
game THEORY ppt
game THEORY pptgame THEORY ppt
game THEORY ppt
 
Game theory ppt
Game theory pptGame theory ppt
Game theory ppt
 
Game theory
Game theoryGame theory
Game theory
 
Game theory
Game theoryGame theory
Game theory
 
Nash equilibrium and applications
Nash equilibrium and applicationsNash equilibrium and applications
Nash equilibrium and applications
 
Game Theory Presentation
Game Theory PresentationGame Theory Presentation
Game Theory Presentation
 
Game Theory : Prisoners Dilemma
Game Theory : Prisoners DilemmaGame Theory : Prisoners Dilemma
Game Theory : Prisoners Dilemma
 
Game theory
Game theoryGame theory
Game theory
 
Game theory
Game theoryGame theory
Game theory
 
Game theory
Game theoryGame theory
Game theory
 
Game theory and its applications
Game theory and its applicationsGame theory and its applications
Game theory and its applications
 
Oligopoly and Game Theory
Oligopoly and Game TheoryOligopoly and Game Theory
Oligopoly and Game Theory
 
Game theory
Game theoryGame theory
Game theory
 
Game theory
Game theoryGame theory
Game theory
 

Andere mochten auch

Design Thinking and Business Model Innovation at SAP - From Efficiency to Inn...
Design Thinking and Business Model Innovation at SAP - From Efficiency to Inn...Design Thinking and Business Model Innovation at SAP - From Efficiency to Inn...
Design Thinking and Business Model Innovation at SAP - From Efficiency to Inn...Tobias Schimmer
 
Future group ppt
Future group pptFuture group ppt
Future group pptAaryendr
 
Michael Porter's 5 Forces in Online retail Store/Retailer Flipkart
Michael Porter's 5 Forces in Online retail Store/Retailer FlipkartMichael Porter's 5 Forces in Online retail Store/Retailer Flipkart
Michael Porter's 5 Forces in Online retail Store/Retailer FlipkartPreeti Acharya
 
Coca cola company strategies
Coca cola company strategiesCoca cola company strategies
Coca cola company strategiescomsats
 
SAP Competency Overview at Azur
SAP Competency Overview at AzurSAP Competency Overview at Azur
SAP Competency Overview at AzurAzur Global
 

Andere mochten auch (7)

Tesla Motors
Tesla MotorsTesla Motors
Tesla Motors
 
Design Thinking and Business Model Innovation at SAP - From Efficiency to Inn...
Design Thinking and Business Model Innovation at SAP - From Efficiency to Inn...Design Thinking and Business Model Innovation at SAP - From Efficiency to Inn...
Design Thinking and Business Model Innovation at SAP - From Efficiency to Inn...
 
Future group ppt
Future group pptFuture group ppt
Future group ppt
 
Michael Porter's 5 Forces in Online retail Store/Retailer Flipkart
Michael Porter's 5 Forces in Online retail Store/Retailer FlipkartMichael Porter's 5 Forces in Online retail Store/Retailer Flipkart
Michael Porter's 5 Forces in Online retail Store/Retailer Flipkart
 
COMPETITIVE ADVANTAGE OF COCA-COLA
COMPETITIVE ADVANTAGE OF COCA-COLA COMPETITIVE ADVANTAGE OF COCA-COLA
COMPETITIVE ADVANTAGE OF COCA-COLA
 
Coca cola company strategies
Coca cola company strategiesCoca cola company strategies
Coca cola company strategies
 
SAP Competency Overview at Azur
SAP Competency Overview at AzurSAP Competency Overview at Azur
SAP Competency Overview at Azur
 

Ähnlich wie Game theory and strategy (PCA16, PCATX)

Yes you can play Monopoly with a Genetic Algorithm - Niels Zeilemaker
Yes you can play Monopoly with a Genetic Algorithm - Niels ZeilemakerYes you can play Monopoly with a Genetic Algorithm - Niels Zeilemaker
Yes you can play Monopoly with a Genetic Algorithm - Niels ZeilemakerGoDataDriven
 
Unlock your creative potential: 7 steps to becoming a game designer
Unlock your creative potential: 7 steps to becoming a game designerUnlock your creative potential: 7 steps to becoming a game designer
Unlock your creative potential: 7 steps to becoming a game designerEthan Levy
 
Toy inventor speech 2019
Toy inventor speech 2019Toy inventor speech 2019
Toy inventor speech 2019douglaslyon
 
Topic 3- Cooperation and Collective Action
Topic 3- Cooperation and Collective ActionTopic 3- Cooperation and Collective Action
Topic 3- Cooperation and Collective ActionJohn Bradford
 
Natural Game Design: How to Birth Games Without Cloning
Natural Game Design: How to Birth Games Without CloningNatural Game Design: How to Birth Games Without Cloning
Natural Game Design: How to Birth Games Without CloningGreg Costikyan
 
Game theory application
Game theory applicationGame theory application
Game theory applicationshakebaumar
 
Making your F2P puzzler a story-driven game, what could possibly go wrong? B...
Making your F2P puzzler  a story-driven game, what could possibly go wrong? B...Making your F2P puzzler  a story-driven game, what could possibly go wrong? B...
Making your F2P puzzler a story-driven game, what could possibly go wrong? B...Artur Ganszyniec
 
Jaakko Kemppainen - Pathfinder in VR - Mindtrek 2016
Jaakko Kemppainen - Pathfinder in VR - Mindtrek 2016Jaakko Kemppainen - Pathfinder in VR - Mindtrek 2016
Jaakko Kemppainen - Pathfinder in VR - Mindtrek 2016Mindtrek
 
Fundamentals of Learning Game Design - ATD CIC 2017
Fundamentals of Learning Game Design - ATD CIC 2017Fundamentals of Learning Game Design - ATD CIC 2017
Fundamentals of Learning Game Design - ATD CIC 2017Sharon Boller
 
The Pixel Lab 2015 | Extending story through play - Nick Fortugno
The Pixel Lab 2015 | Extending story through play - Nick FortugnoThe Pixel Lab 2015 | Extending story through play - Nick Fortugno
The Pixel Lab 2015 | Extending story through play - Nick Fortugnopower to the pixel
 
Transmedia, Gamification, Advergaming
Transmedia, Gamification, AdvergamingTransmedia, Gamification, Advergaming
Transmedia, Gamification, AdvergamingGAMESbrief
 
Play to Learn: Effective Learning Game Design
Play to Learn: Effective Learning Game DesignPlay to Learn: Effective Learning Game Design
Play to Learn: Effective Learning Game DesignSharon Boller
 
Your Game is None of Your Business | Randall Robbins
Your Game is None of Your Business | Randall RobbinsYour Game is None of Your Business | Randall Robbins
Your Game is None of Your Business | Randall RobbinsJessica Tams
 

Ähnlich wie Game theory and strategy (PCA16, PCATX) (20)

041913
041913041913
041913
 
Nature of Games.pptx
Nature of Games.pptxNature of Games.pptx
Nature of Games.pptx
 
Yes you can play Monopoly with a Genetic Algorithm - Niels Zeilemaker
Yes you can play Monopoly with a Genetic Algorithm - Niels ZeilemakerYes you can play Monopoly with a Genetic Algorithm - Niels Zeilemaker
Yes you can play Monopoly with a Genetic Algorithm - Niels Zeilemaker
 
Unlock your creative potential: 7 steps to becoming a game designer
Unlock your creative potential: 7 steps to becoming a game designerUnlock your creative potential: 7 steps to becoming a game designer
Unlock your creative potential: 7 steps to becoming a game designer
 
Toy inventor speech 2019
Toy inventor speech 2019Toy inventor speech 2019
Toy inventor speech 2019
 
Topic 3- Cooperation and Collective Action
Topic 3- Cooperation and Collective ActionTopic 3- Cooperation and Collective Action
Topic 3- Cooperation and Collective Action
 
game theory
game theorygame theory
game theory
 
Natural Game Design: How to Birth Games Without Cloning
Natural Game Design: How to Birth Games Without CloningNatural Game Design: How to Birth Games Without Cloning
Natural Game Design: How to Birth Games Without Cloning
 
TJD_2023_Lab_06.pptx
TJD_2023_Lab_06.pptxTJD_2023_Lab_06.pptx
TJD_2023_Lab_06.pptx
 
Game theory application
Game theory applicationGame theory application
Game theory application
 
Balancing Virtual Economies in free2play Games
Balancing Virtual Economies in free2play GamesBalancing Virtual Economies in free2play Games
Balancing Virtual Economies in free2play Games
 
Making your F2P puzzler a story-driven game, what could possibly go wrong? B...
Making your F2P puzzler  a story-driven game, what could possibly go wrong? B...Making your F2P puzzler  a story-driven game, what could possibly go wrong? B...
Making your F2P puzzler a story-driven game, what could possibly go wrong? B...
 
Jaakko Kemppainen - Pathfinder in VR - Mindtrek 2016
Jaakko Kemppainen - Pathfinder in VR - Mindtrek 2016Jaakko Kemppainen - Pathfinder in VR - Mindtrek 2016
Jaakko Kemppainen - Pathfinder in VR - Mindtrek 2016
 
Fundamentals of Learning Game Design - ATD CIC 2017
Fundamentals of Learning Game Design - ATD CIC 2017Fundamentals of Learning Game Design - ATD CIC 2017
Fundamentals of Learning Game Design - ATD CIC 2017
 
The Pixel Lab 2015 | Extending story through play - Nick Fortugno
The Pixel Lab 2015 | Extending story through play - Nick FortugnoThe Pixel Lab 2015 | Extending story through play - Nick Fortugno
The Pixel Lab 2015 | Extending story through play - Nick Fortugno
 
Transmedia, Gamification, Advergaming
Transmedia, Gamification, AdvergamingTransmedia, Gamification, Advergaming
Transmedia, Gamification, Advergaming
 
Play to Learn: Effective Learning Game Design
Play to Learn: Effective Learning Game DesignPlay to Learn: Effective Learning Game Design
Play to Learn: Effective Learning Game Design
 
Your Game is None of Your Business | Randall Robbins
Your Game is None of Your Business | Randall RobbinsYour Game is None of Your Business | Randall Robbins
Your Game is None of Your Business | Randall Robbins
 
Scratch Lesson 6
Scratch Lesson 6Scratch Lesson 6
Scratch Lesson 6
 
Playtest from AAA to III
Playtest from AAA to III Playtest from AAA to III
Playtest from AAA to III
 

Kürzlich hochgeladen

PDT 88 - 4 million seed - Seed - Protecto.pdf
PDT 88 - 4 million seed - Seed - Protecto.pdfPDT 88 - 4 million seed - Seed - Protecto.pdf
PDT 88 - 4 million seed - Seed - Protecto.pdfHajeJanKamps
 
Anyhr.io | Presentation HR&Recruiting agency
Anyhr.io | Presentation HR&Recruiting agencyAnyhr.io | Presentation HR&Recruiting agency
Anyhr.io | Presentation HR&Recruiting agencyHanna Klim
 
Upgrade Your Banking Experience with Advanced Core Banking Applications
Upgrade Your Banking Experience with Advanced Core Banking ApplicationsUpgrade Your Banking Experience with Advanced Core Banking Applications
Upgrade Your Banking Experience with Advanced Core Banking ApplicationsIntellect Design Arena Ltd
 
AMAZON SELLER VIRTUAL ASSISTANT PRODUCT RESEARCH .pdf
AMAZON SELLER VIRTUAL ASSISTANT PRODUCT RESEARCH .pdfAMAZON SELLER VIRTUAL ASSISTANT PRODUCT RESEARCH .pdf
AMAZON SELLER VIRTUAL ASSISTANT PRODUCT RESEARCH .pdfJohnCarloValencia4
 
Borderless Access - Global Panel book-unlock 2024
Borderless Access - Global Panel book-unlock 2024Borderless Access - Global Panel book-unlock 2024
Borderless Access - Global Panel book-unlock 2024Borderless Access
 
A flour, rice and Suji company in Jhang.
A flour, rice and Suji company in Jhang.A flour, rice and Suji company in Jhang.
A flour, rice and Suji company in Jhang.mcshagufta46
 
HELENE HECKROTTE'S PROFESSIONAL PORTFOLIO.pptx
HELENE HECKROTTE'S PROFESSIONAL PORTFOLIO.pptxHELENE HECKROTTE'S PROFESSIONAL PORTFOLIO.pptx
HELENE HECKROTTE'S PROFESSIONAL PORTFOLIO.pptxHelene Heckrotte
 
The End of Business as Usual: Rewire the Way You Work to Succeed in the Consu...
The End of Business as Usual: Rewire the Way You Work to Succeed in the Consu...The End of Business as Usual: Rewire the Way You Work to Succeed in the Consu...
The End of Business as Usual: Rewire the Way You Work to Succeed in the Consu...Brian Solis
 
IIBA® Melbourne - Navigating Business Analysis - Excellence for Career Growth...
IIBA® Melbourne - Navigating Business Analysis - Excellence for Career Growth...IIBA® Melbourne - Navigating Business Analysis - Excellence for Career Growth...
IIBA® Melbourne - Navigating Business Analysis - Excellence for Career Growth...AustraliaChapterIIBA
 
Mihir Menda - Member of Supervisory Board at RMZ
Mihir Menda - Member of Supervisory Board at RMZMihir Menda - Member of Supervisory Board at RMZ
Mihir Menda - Member of Supervisory Board at RMZKanakChauhan5
 
Borderless Access - Global Panel book-unlock 2024
Borderless Access - Global Panel book-unlock 2024Borderless Access - Global Panel book-unlock 2024
Borderless Access - Global Panel book-unlock 2024Borderless Access
 
Introduction to The overview of GAAP LO 1-5.pptx
Introduction to The overview of GAAP LO 1-5.pptxIntroduction to The overview of GAAP LO 1-5.pptx
Introduction to The overview of GAAP LO 1-5.pptxJemalSeid25
 
Boat Trailers Market PPT: Growth, Outlook, Demand, Keyplayer Analysis and Opp...
Boat Trailers Market PPT: Growth, Outlook, Demand, Keyplayer Analysis and Opp...Boat Trailers Market PPT: Growth, Outlook, Demand, Keyplayer Analysis and Opp...
Boat Trailers Market PPT: Growth, Outlook, Demand, Keyplayer Analysis and Opp...IMARC Group
 
Borderless Access - Global B2B Panel book-unlock 2024
Borderless Access - Global B2B Panel book-unlock 2024Borderless Access - Global B2B Panel book-unlock 2024
Borderless Access - Global B2B Panel book-unlock 2024Borderless Access
 
Live-Streaming in the Music Industry Webinar
Live-Streaming in the Music Industry WebinarLive-Streaming in the Music Industry Webinar
Live-Streaming in the Music Industry WebinarNathanielSchmuck
 
Chicago Medical Malpractice Lawyer Chicago Medical Malpractice Lawyer.pdf
Chicago Medical Malpractice Lawyer Chicago Medical Malpractice Lawyer.pdfChicago Medical Malpractice Lawyer Chicago Medical Malpractice Lawyer.pdf
Chicago Medical Malpractice Lawyer Chicago Medical Malpractice Lawyer.pdfSourav Sikder
 
Tata Kelola Bisnis perushaan yang bergerak
Tata Kelola Bisnis perushaan yang bergerakTata Kelola Bisnis perushaan yang bergerak
Tata Kelola Bisnis perushaan yang bergerakEditores1
 
Graham and Doddsville - Issue 1 - Winter 2006 (1).pdf
Graham and Doddsville - Issue 1 - Winter 2006 (1).pdfGraham and Doddsville - Issue 1 - Winter 2006 (1).pdf
Graham and Doddsville - Issue 1 - Winter 2006 (1).pdfAnhNguyen97152
 
MC Heights construction company in Jhang
MC Heights construction company in JhangMC Heights construction company in Jhang
MC Heights construction company in Jhangmcgroupjeya
 

Kürzlich hochgeladen (20)

PDT 88 - 4 million seed - Seed - Protecto.pdf
PDT 88 - 4 million seed - Seed - Protecto.pdfPDT 88 - 4 million seed - Seed - Protecto.pdf
PDT 88 - 4 million seed - Seed - Protecto.pdf
 
Anyhr.io | Presentation HR&Recruiting agency
Anyhr.io | Presentation HR&Recruiting agencyAnyhr.io | Presentation HR&Recruiting agency
Anyhr.io | Presentation HR&Recruiting agency
 
Upgrade Your Banking Experience with Advanced Core Banking Applications
Upgrade Your Banking Experience with Advanced Core Banking ApplicationsUpgrade Your Banking Experience with Advanced Core Banking Applications
Upgrade Your Banking Experience with Advanced Core Banking Applications
 
AMAZON SELLER VIRTUAL ASSISTANT PRODUCT RESEARCH .pdf
AMAZON SELLER VIRTUAL ASSISTANT PRODUCT RESEARCH .pdfAMAZON SELLER VIRTUAL ASSISTANT PRODUCT RESEARCH .pdf
AMAZON SELLER VIRTUAL ASSISTANT PRODUCT RESEARCH .pdf
 
Borderless Access - Global Panel book-unlock 2024
Borderless Access - Global Panel book-unlock 2024Borderless Access - Global Panel book-unlock 2024
Borderless Access - Global Panel book-unlock 2024
 
A flour, rice and Suji company in Jhang.
A flour, rice and Suji company in Jhang.A flour, rice and Suji company in Jhang.
A flour, rice and Suji company in Jhang.
 
HELENE HECKROTTE'S PROFESSIONAL PORTFOLIO.pptx
HELENE HECKROTTE'S PROFESSIONAL PORTFOLIO.pptxHELENE HECKROTTE'S PROFESSIONAL PORTFOLIO.pptx
HELENE HECKROTTE'S PROFESSIONAL PORTFOLIO.pptx
 
The End of Business as Usual: Rewire the Way You Work to Succeed in the Consu...
The End of Business as Usual: Rewire the Way You Work to Succeed in the Consu...The End of Business as Usual: Rewire the Way You Work to Succeed in the Consu...
The End of Business as Usual: Rewire the Way You Work to Succeed in the Consu...
 
IIBA® Melbourne - Navigating Business Analysis - Excellence for Career Growth...
IIBA® Melbourne - Navigating Business Analysis - Excellence for Career Growth...IIBA® Melbourne - Navigating Business Analysis - Excellence for Career Growth...
IIBA® Melbourne - Navigating Business Analysis - Excellence for Career Growth...
 
Mihir Menda - Member of Supervisory Board at RMZ
Mihir Menda - Member of Supervisory Board at RMZMihir Menda - Member of Supervisory Board at RMZ
Mihir Menda - Member of Supervisory Board at RMZ
 
Borderless Access - Global Panel book-unlock 2024
Borderless Access - Global Panel book-unlock 2024Borderless Access - Global Panel book-unlock 2024
Borderless Access - Global Panel book-unlock 2024
 
Introduction to The overview of GAAP LO 1-5.pptx
Introduction to The overview of GAAP LO 1-5.pptxIntroduction to The overview of GAAP LO 1-5.pptx
Introduction to The overview of GAAP LO 1-5.pptx
 
Boat Trailers Market PPT: Growth, Outlook, Demand, Keyplayer Analysis and Opp...
Boat Trailers Market PPT: Growth, Outlook, Demand, Keyplayer Analysis and Opp...Boat Trailers Market PPT: Growth, Outlook, Demand, Keyplayer Analysis and Opp...
Boat Trailers Market PPT: Growth, Outlook, Demand, Keyplayer Analysis and Opp...
 
Borderless Access - Global B2B Panel book-unlock 2024
Borderless Access - Global B2B Panel book-unlock 2024Borderless Access - Global B2B Panel book-unlock 2024
Borderless Access - Global B2B Panel book-unlock 2024
 
Live-Streaming in the Music Industry Webinar
Live-Streaming in the Music Industry WebinarLive-Streaming in the Music Industry Webinar
Live-Streaming in the Music Industry Webinar
 
Chicago Medical Malpractice Lawyer Chicago Medical Malpractice Lawyer.pdf
Chicago Medical Malpractice Lawyer Chicago Medical Malpractice Lawyer.pdfChicago Medical Malpractice Lawyer Chicago Medical Malpractice Lawyer.pdf
Chicago Medical Malpractice Lawyer Chicago Medical Malpractice Lawyer.pdf
 
Tata Kelola Bisnis perushaan yang bergerak
Tata Kelola Bisnis perushaan yang bergerakTata Kelola Bisnis perushaan yang bergerak
Tata Kelola Bisnis perushaan yang bergerak
 
Investment Opportunity for Thailand's Automotive & EV Industries
Investment Opportunity for Thailand's Automotive & EV IndustriesInvestment Opportunity for Thailand's Automotive & EV Industries
Investment Opportunity for Thailand's Automotive & EV Industries
 
Graham and Doddsville - Issue 1 - Winter 2006 (1).pdf
Graham and Doddsville - Issue 1 - Winter 2006 (1).pdfGraham and Doddsville - Issue 1 - Winter 2006 (1).pdf
Graham and Doddsville - Issue 1 - Winter 2006 (1).pdf
 
MC Heights construction company in Jhang
MC Heights construction company in JhangMC Heights construction company in Jhang
MC Heights construction company in Jhang
 

Game theory and strategy (PCA16, PCATX)

  • 3. What? • A primer on basic game theory concepts – Basic – We try to avoid math – If you know a lot about Game Theory already, you may get bored • A discussion on applying game theoretic concepts to product strategy
  • 4. Why? • I think Game Theory is Fun! • Interesting and illuminating perspective on behavior of both people and firms • Analytical toolset for competitive scenarios
  • 5. Who? • From Israel • Student of Behavior and Business • GTM Consultant for multiple startups • Previously PdM and Strategist in Dell and EMC and a variety of software development roles • Winner of the non existent “crappiest slide in PCA15” award
  • 6. Agenda • What is Game Theory? • A Few Games and Business Analogies – Rock, Paper, Scissors: • Zero-sum, symmetric game – Prisoner’s Dilemma: • Pricing, market entry, volume • Iterated Prisoner’s Dilemma: TFT • Collusion/Cooperation in IPD – cartels – Chicken and the Value of Commitments • Investment, market entry
  • 7. What is Game Theory? • Mathematical discipline designed to answer questions like: – You are playing Rock Paper Scissors. Which do you choose? – Can some games be “solved”? (Tic Tac Toe, Chess, Go?) – Should we build more nuclear weapons in the cold war or less? How do we ensure that a disarmament agreement is enforceable? • Developed mathematically by Von Neumann (of the Manhattan Project fame), Nash (Of “A Beautiful Mind” fame), and Morgenstern (not as famous, but definitely deserves props) during 40s and 50s.
  • 8. So, what does that have to do with me? • You sell a product that is very similar to your competitor. Do you: – Price low to steal his customers? – Price the same? – Price higher? • You need to invest in a factory to create your product • You open a gas station – should you locate it across the street from your competition or the other side of town? – Who can give an example of something more tech-y that is gas-station-esque?
  • 9. Types of Games • Sequential vs. Simultaneous – Sequential: Chess, Checkers, Tic-Tac-Toe • Solvable • Game tree solution – Simultaneous: Rock Paper Scissors • Solvable • Equilibria solutions • Most business problems are simultaneous (or very close to it) rather than sequential • Our focus will be simultaneous, 2 player games
  • 10. Brain Teaser – Cut the Cake • Two twin brothers have gotten a cake from their parents for their birthday. • What is the best way for them to split it so they are both happy?
  • 11. Rock, Paper, Scissors This is a game Rock Paper Scissors Rock 0 , 0 -1 , 1 1 , -1 Paper 1 , -1 0 , 0 -1 , 1 Scissors -1, 1 1 , -1 0 , 0 So how do I read it? • The first number in each pair is the payout for the row player – the second is for the column So, who cares? • This is a boring game – but it’s here as an example for more interesting ones • Still – interesting to note: – Symmetric – Zero Sum
  • 12. Rock, Paper, Scissors Rock Paper Scissors Rock 0 , 0 -1 , 1 1 , -1 Paper 1 , -1 0 , 0 -1 , 1 Scissors -1, 1 1 , -1 0 , 0 So, again, I ask, who cares? • RPS is a classic example for a zero sum, symmetric game – Zero sum: Winning is done at the expense of the loser – Symmetric: Identical options with identical payoffs exist to all players
  • 13. Let’s Play! Find a partner – and play Rock, Paper, Scissors! Rock Paper Scissors Rock 0 , 0 -1 , 1 1 , -1 Paper 1 , -1 0 , 0 -1 , 1 Scissors -1, 1 1 , -1 0 , 0
  • 14. What have we learned? • Does RPS have much in common with real business problems? • What’s the best strategy for playing RPS?
  • 15. Prisoner’s Dilemma • A classic! • Probably most famous game in Game Theory • We are going to spend some time here, so get comfy
  • 16. So, what’s the big deal? (positive payoffs are desirable) Shut up Snitch! Shut up 3 , 3 0 , 5 Snitch! 5 , 0 1 , 1 • Two burglars are busted and put in separate rooms • Police interrogate and promise the first one to snitch a deal • Now, things get interesting. • What would you do?
  • 17. Equilibrium (positive payoffs are desirable) Shut up Snitch! Shut up 3 , 3 0 , 5 Snitch! 5 , 0 1 , 1 • The problem should be clear • Everyone would be better off shutting up – but each individual would rather snitch • Therefore, the Nash Equilibrium (and therefore the result of the game if played by rational, payoff maximizing players) is the sub optimal bottom right corner
  • 18. What does PD apply to? • Can you think of any real life scenario in which PD applies to?
  • 19. A ton of them! • Pricing/Promotions: We are selling a similar product; should I price low (and then steal share) or high? – http://www.businessweek.com/articles/2013-11- 19/best-buy-and-the-holiday-retail-prisoners-dilemma • “Feature Wars” • In fact, most non-zero sum games in which cooperation yields more benefits than competing can be modeled like a PD game
  • 20. So what do we do? • The bad news: The solution to a standard, “pure” Prisoner’s Dilemma game is always mutual defection. Sorry. It’s a cruel world. • The good news: Reality is infinitely more complex; there are factors we can explore and ways to “change the game” – IPD – Collusion (don’t do that!) – Change the Game
  • 21. Let’s try something • Pick your gaming partner • Play the game! (positive payoffs are desirable) Shut up Snitch! Shut up 3 , 3 0 , 5 Snitch! 5 , 0 1 , 1
  • 22. Show of Hands • Who picked snitching? Why? • Who picked shutting up? Why?
  • 23. And now, a Twist! • Play the game again. • And again. • And again. • Until I tell you to stop.
  • 24. Iterated Prisoner’s Dilemma • An interesting result emerges when playing PD multiple times. Why? • What if I told you that you had exactly 100 turns to play? • Strategies: TFT, TF2TT • Axelrod’s Successful Strategy: – Clear – Provocable – Nice – Forgiving
  • 25. Collusion Careful! I’m not a lawyer, but usually, this is illegal  Excerpt from Cramton & Schwartz 2002 – see table 1 at http://drum.lib.umd.edu/bitstream/1903/7061/1/cramton-schwartz-collusive-bidding.pdf (can’t put table here for copyright reasons)
  • 26. Change the Game • What are other options to change the game? • What if you locked the loot from the burglary with two keys? • Examples from a Product Strategy perspective: – Differentiation – Consortiums (pooled standard ownership for IP) – Punitive clauses in contracts – Price matching clauses (retroactive ones as well) – Most favored customer clauses
  • 27. Let’s Play Chicken! Swerve Drive on! Swerve Lose (-1) , Lose (-1) Lose (-1), Win (1) Drive on! Win (1), Lose (-1) Splat! (-3) , Splat! (-3) • Anti-cooperation game • What are business analogies? • How can you win?
  • 28. The Factory Game (A version of Chicken) • What’s the Nash equilibrium? • How do you win? Build Not Build Build Competition : 1, 1 Monopoly: 2, 0 Not Build Monopoly: 0, 2 Nothing: 0, 0
  • 29. Some interesting questions if we have time left • You need to bid on ad keywords. Are you better off having keywords that are identical, or different from your competition? • Do you think it’s better to ape your competitors features or remove them entirely? • When you build a store location – would you rather build it next to your competitor, or somewhere else?
  • 30. Hotelling’s Problem – or why Differentiation doesn’t always Work The setting – the beach; the adversaries – two hot dog cart vendors. • Where should they place their carts? • What is the socially optimal placement? • What is the actual equilibrium? • Why do I care? Differentiation only matters when it’s difficult or costly to copy
  • 31. Do We Have Time for One More? • This is a game called “Keynesian Beauty Contest” • The story is that of a beauty contest: Given faces published in a newspaper, pick the prettiest face. The winner is the one who picked the most popular face. • We’ll model this here in a variant.
  • 32. Pick a card, any card • The options are numbers from 1-10 • The winner is the person who guesses closest to 2/3 of the average • Ready? Go! Either scan the QR code with a QR code scanning up – go to : http://shortn.me/kFiK Or text: GAMES to (952) 649-5350
  • 36. Further Reading • Art of Strategy: Dixit & Nalebuff • Evolution of Cooperation: Axelrod • Prisoner’s Dilemma: Poundstone • Coursera: Game Theory, Advanced Game Theory

Hinweis der Redaktion

  1. No Nash equilibrium or minimax theory (unless you really want to); no game trees; no dominant and dominated strategies; no games with imperfect information – just the basics.
  2. Here’s a hint – not many business problems are zero sum ; there is almost always a way to grow the pie. Assuming perfectly rational players – mixed 1/3 1/3 1/3 strategy is Nash equiblirium
  3. Yes, has to be symmetric
  4. Business analogies – (factory next slide) Commitment signaling (option limiting)
  5. Commitment signaling (Build a larger factory than you have to – means that you can undercut price and try to maintain money) What are some examples that don’t involve physical goods? Website launch in a locale Setting up a large sales office Investing heavily and publicly in a product feature that both companies want Visibility is key for signaling to work