Thinking Strategically: The Competitive Edge in Business, Politics, and Everyday Life

In addition to the basic categories of games—solo versus multiplayer, simultaneous versus sequential, cooperative versus competitive—game theory includes many tactics that can apply to any situation. These include making commitments, establishing credibility, making strategic moves, being unpredictable, playing a dominant strategy, and reaching an equilibrium.

A commitment can be a promise or a threat: If Player B does one thing, Player A will respond with a reward or punishment. Commitments can funnel opponents' moves into narrow pathways over which the committed player has control. One type of commitment involves “brinkmanship,” which drags others toward universal disaster if they don’t do what the player demands, a tactic made famous during the Cuban Missile Crisis, when nuclear war lay beyond the brink.

If a player has no credibility, other players will ignore their commitments. It’s important to establish a reliable track record by making moves consistent with any commitments. Especially bad for trust is to renege on a promise.

On the other hand, a player mustn’t become so predictable that others can easily anticipate that player’s moves. Thus, during regular play, competitors do well to randomize their choice of moves. For example, baseball pitchers might establish a 50-50 rule for fast balls and curve balls, and then glance at their wristwatch, and if, say, the watch reports an even-numbered second, they throw a fast ball.

Now and then, a player realizes that her best strategy is to destroy the thing her opponent wants. Armies in retreat sometimes burn towns and farms to deprive invaders of resources; businesses facing a hostile takeover might devise a “poison pill” that ruins the firm’s value to the raider. These are “strategic moves,” and players make public commitments to use them if others attack.

Sometimes a player discovers that one strategy is as good or better than all others. This is the player’s “dominant strategy,” the one s/he should use at all times. Similarly, a “dominated strategy” is one that’s worse, or no better than, all other strategies. This approach should be abandoned, along with any other such strategies that crop up.

Some games fall into predictable patterns where players settle into predictable moves. These games reach “equilibrium,” a state where play becomes stable and routine. A trade partnership or alliance might slip into this state, either for good or ill, where the partners have no other moves to make; feuds also reach equilibria, where the sides punish each other for punishing each other, over and over, until one or both sides cease play by going bankrupt, giving up, or dying. With equilibria, the game’s future moves are known to all sides; strategizing ends, and play becomes routine.

All categories of play, then, respond to commitment, credibility, and randomness, and every game may contain best or worst strategies, along with places where play descends into states of equilibrium.