Your next move
will not be the last move.
Examine how customers, partners and competitors could respond before building a strategy around everyone standing still.
Map the interactionOther people get a turn.
Game theory examines strategic interaction: situations where the value of a choice depends in part on what other decision-makers do. MIT’s economic applications course provides an academic starting point.
In an advisory engagement, I use that perspective to help examine a business decision, its incentives and plausible responses. The useful output is a clearer view of the choices and assumptions, not a claim to predict everyone’s behavior.
A spreadsheet that assumes a competitor never responds can be very reassuring. It can also be describing a market that does not exist.
Describe the interaction before choosing the tactic.
Who can change the outcome?
Name the decision-makers whose actions matter. Distinguish the customer, channel partner, supplier and competitor rather than treating “the market” as one actor.
What can each party do?
List credible alternatives and relevant limits. A response that is impossible to fund, deliver or authorize should not be treated as equally plausible to an easy one.
What do they know and value?
Record the information available to each party and the outcomes they may prefer. Mark these as assumptions where you lack evidence.
Does the relationship continue?
A one-off transaction and a recurring relationship create different considerations. Examine what today’s decision does to future cooperation and expectations.
The incentive may reward the behavior you wish would stop.
The stated objective
A company wants suitable new customers who can be served well. It rewards the sales team entirely on signed contracts, regardless of implementation requirements.
Delivery then receives work with conditions that were never part of the approved offer.
The interaction to examine
Sales responds to the reward, customers respond to the promise and delivery absorbs the exceptions. An advisory review can examine what the arrangement encourages and what information is missing at commitment.
Any change to compensation or employment arrangements belongs with the appropriate organizational specialists.
The example does not establish that one incentive scheme is right for every company. It shows why the interests and choices of several participants must be considered together.
Pressure-test a strategy against more than one response.
For each credible response, ask what your organization would do next and which evidence would change the plan. If the preferred strategy only works when the other party makes an implausibly convenient choice, revise the assumptions.
Keep the analysis proportionate. Some decisions need formal quantitative modeling by a specialist. Others first need a clear response map, better evidence or a more precise account of the incentives.
A useful scope has boundaries.
This work supports independent business decisions and the design of legitimate working arrangements. It is not advice to coordinate prices or market behavior with competitors. Legal questions around competition, contracts or regulated activity need qualified advice.
For wider executive decision support, see C-suite advisory. If the problem is estimating a future workload or outcome from data, predictive analytics consulting addresses a different assignment.
Can game theory tell us exactly what a competitor will do?
No. It helps structure assumptions and possible responses. Real decisions depend on information, objectives and constraints you may not know.
Do we need a mathematical model?
That depends on the question. Begin with the interaction and the evidence. Formal modeling may be appropriate when the decision and available information justify it.
What should we bring?
Bring one decision, the parties involved, the alternatives under consideration and what you know about their constraints. Separate observed facts from beliefs.