Game theory dixit. Avinash Dixit - Game Theory. The art of strategic thinking in business and life

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Description of the book: The authors of this book are real professionals in economics. For many years they have been research activities in the field of strategies that are used to plan trade or business activities. They have always sought to understand why the participants in numerous struggles strive to achieve their goal. They tried to convey to modern readers that modern life cannot be without threats, manipulation and blackmail. AT real life It is very important to be ready for anything, so that at the most necessary moment you will not be left without everything.

In these days of active fight against piracy, most of the books in our library have only brief fragments for review, including the book Game Theory. The art of strategic thinking in business and life. Thanks to this, you can understand whether you like this book and whether you should buy it in the future. Thus, you support the work of the writer Barry J. Nalebuff by legally purchasing the book if you liked its summary.

Avinash Dixit and Barry Nailbuff

Game theory. The art of strategic thinking in business and life

Scientific editor Nadezhda Reshetnik

Published with permission from W.W. Norton & Company, Inc. and literary agency Andrew Nurnberg

All rights reserved. No part of this publication may be reproduced for any purpose in any form or by any means, electronic or mechanical, including photocopying and recording on magnetic media, without the written permission of the publisher.

All Rights Reserved. Authorized translation from the English language edition published by John Wiley & Sons Limited. Responsibility for the accuracy of the translation rests solely with MANN. IVANOV AND FERBER and is not the responsibility of John Wiley & Sons Limited. No part of this book may be reproduced in any form without the written permission of the original copyright holder, John Wiley & Sons Limited.

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To all our students, from whom we have learned a lot (especially Seth. – B.N.)

Foreword

WE DID NOT PLAN TO write a new book. We were only going to make the necessary changes and additions to our previous book, Strategic Thinking. But everything turned out differently.

One of the reasons why we decided to revise and correct the previous edition of the book can be explained by the example of Jorge Luis Borges' hero, Pierre Menard, who decided to rewrite Cervantes' novel Don Quixote. With a lot of effort, Menard created new version novel, word for word repeating the original. However, 300 years have passed since Don Quixote was published. Menard used the same words in his novel, but endowed them with a completely different meaning.

Alas, our original text is not equivalent to Don Quixote, so we still had to change something in the revised and corrected edition. In reality b about most of the book contains new material. New applications, new concepts and new points of view have emerged. Since the publication of the first book, so many new things have appeared that we have seen fit to give this edition a new name. On the other hand, although we use new words, the intent remains the same. We want to change your perception of the world around you and help you think strategically by introducing the concepts and logic of game theory.

Like Pierre Menard, we also have a new point of view on what is happening. When we wrote Strategic Thinking, we were younger; in addition, the idea of self-centered competition dominated in those days. Since then, we have fully realized how important cooperation is in strategic situations and why good strategy must necessarily represent an acceptable mix of competition and cooperation (one of us wrote a book on the subject: Competitive Cooperation in Business).

The preface to the first edition of the book began: “Strategic thinking is the ability to outperform your opponent, knowing that your opponent is also trying to outperform you.” Now we add to these words: it is also the ability to find ways for cooperation, even if others are guided only by their own interests, and not by selflessness. This is the ability to convince others (and even yourself) of the need to do what you promise. It is the ability to interpret and disclose information. This is the ability to put yourself in the place of another person in order to predict his actions and influence them.

I would like to think that The Art of Strategy reflects this more mature and wiser point of view. But there is also continuity. While we offer more real-life stories in this new edition, our goal remains the same: to help you develop your way of thinking in the strategic situations you will face. This is not a business travel book offering "seven steps to guaranteed strategic success." The situations you will face will be so varied that you will get better results by knowing some general principles building strategies and adapting them to the topics strategic games that you are playing.

Businesses and corporations must develop effective competitive strategies to survive and find opportunities for collaboration to "blow the pie." Politicians must devise campaigning strategies to get elected and legislative strategies to make their visions a reality. Football coaches develop strategies that players must follow on the field. Parents who are trying to get their children to behave well also need to become amateur strategists - children are already experts in this field.

Effective strategic thinking in such diverse contexts is still a true art. However, at its core, it boils down to a set of basic principles from the new science of strategy, game theory. In writing this book, we have assumed that knowledge of these principles will enable readers of all levels of education and professions to become more effective strategists.

Some people doubt whether logic and science can be applied to the world, because people behave in it irrationally. But it turned out that in the chaos of this world there is a system. We have used the most valuable of the latest advances in behavioral game theory, which takes into account human psychology and bias, thus including the social factor in game theory. As a result, game theory allows you to get much more powerful results by studying people as they are, and not as we would like them to be. All of these ideas are explored in this book.

Game theory is a relatively young science, a little over seventy years old, but it has already provided a lot of useful information for practicing strategists. But like all other sciences, game theory is too overloaded with special terminology and mathematical calculations. These are undeniably important tools for scientific research, but they limit the circle of people who can understand the basic concepts of game theory to specialists in this field. The main motive for writing Strategic Thinking was our conviction that game theory is too interesting and important to limit its scope to publications in academic journals. The basic concepts of this theory can be useful in many areas, including business, politics, sports, and even in everyday life. social interaction. That is why we have formulated the most important concepts of game theory in a more understandable language and have replaced purely theoretical reasoning with real-life examples.

As usual, we chose a few amusing ideas.

Rely on probability - to allow the victory of hope over experience.
All decision makers are players, and the choices made are moves.
In technological races, it is more profitable for the laggards and newcomers to use innovative strategies, and for the leaders to implement what newcomers have proven.

Intransigence is beneficial to a certain extent, but over time everyone will begin to avoid cooperation with you. Electoral intransigence makes more sense.
Groucho Marx (actor, comedian): "I would never join a club that would agree to accept me."
It's not enough to play well. You need to be sure that you are playing the right game.
Bernard Shaw on the golden rule: "You should not do to others the way you would like them to do to you, because they may have completely different tastes." Understand the other player.
A stuck wheel is lubricated.
Look ahead and reason backwards.
What value do the participants in the game attach to justice and altruism? If the members of the group are close to justice and altruism, there are fewer conflicts, it spends less resources on conflict resolution and receives more benefits compared to the group of egoists. However, without a certain measure of selfishness and competition, innovation, evolution and progress are impossible. There needs to be a balance between caring for yourself and others.
What are your dominant and dominated strategies? If dominant strategies don't work, look for a mutually optimal solution.
Everyone strives to consume as many resources as possible for personal gain, shifting the consequences to others or to future generations.
You need a focal point: almost perfect, plus a cute flaw that gives personality and attracts attention.
Many people believe that in any game there must be a winner and a loser. But not all games have pure conflict. Usually conflict and common interests are combined.
Threats, promises, obligations, coercion, deterrence, reputation, assurances, etc. are all concepts that game theory operates on. It pervades our entire existence.
Learning to win the game with yourself is more important than the game with others.
A person may be weak on his own, but becomes decisive in a team.
No signal is a signal.
Mix game strategies.
By reducing effort, you win more.
No need for illusions. The cooperation strategy has back side: the desire to avoid betrayal. You cannot predict your behavior in the game. "I will never trust anyone again in my life."
CT scans show that punishing someone activates the dorsal striatum, the part of the brain that is responsible for pleasure. People take pleasure in punishing the violators of collective agreements. Evolution once needed this mechanism.
Your thoughts and actions have no influence on other people's thoughts and actions. Others make decisions without knowing what you think and do. We are deluded by "quasi-magical thinking".
The Chinese strategist Sun Tzu believed that the enemy should leave a path for withdrawal. His absence is a credible obligation to fight to the death.

Any client who accepts your offer is the client you need.

Barry J. Nailbuff, Avinash Dixit

Game theory. The art of strategic thinking in business and life

Avinash K. Dixit, Barry J. Nalebuff

The Art of Strategy:

A Game Theorist's Guide to Success in Business and Life

Scientific editor Nadezhda Reshetnik

Published with permission from W.W. Norton & Company, Inc. and literary agency Andrew Nurnberg

Legal support for the publishing house is provided by Vegas Lex law firm.

Foreword by the publication partner

IN BIG BOOKSTORE I always want to buy a lot of books at once, especially those on my favorite topics: management, marketing and education. I would certainly buy this book, because it was recommended to me by the Mann, Ivanov and Ferber publishing house, for which I am very grateful. Now, after reading it, I can say with confidence that I will definitely re-read it again.

Game theory is a branch of mathematics that studies the choice of optimal strategies in conflict situations in which there is a struggle between participants. Each side pursues its own interests and seeks the most profitable solution, possibly to the detriment of rivals. Most simple examples similar games- chess, card games, sports. All of them are conducted according to set rules that cannot be violated. But in real life, rivals can do anything to win: they threaten, manipulate, deceive, for example, the relationship between parents and a naughty child.

At first glance, one can conclude that due to the human factor and simple chance, it is almost impossible to predict the outcome of the conflict. But it's not. Each of our choices is the choice of a dominant strategy (the most profitable given the invariability of the strategies of other players), which makes our behavior predictable in the eyes of those who are fluent in game theory.

For me, getting to know game theory became intuitive. This happened when I started working with large clients: negotiations with them required more thorough preparation. In small and fast transactions, it is important to know the product perfectly and understand the needs of the client. When we are talking about large amounts, the strategy of the client's behavior, his interests, alternatives and goals are of particular importance. Long negotiations and meetings really resembled a game in which I always aimed for both sides to emerge victorious. The same games also take place between a manager and a subordinate - for example, when it comes to changing wages or setting a difficult task. Therefore, I read this book with excitement, because in it everything that was incomprehensible to me turned out to be a long-thought-out model of behavior.

In my opinion, the special merit of the authors is that in the book they reduced mathematics to a minimum. Avinash Dixit and Barry Nailbuff have put together common and easy-to-understand examples to show how games work in real life. They showed that game theory is interesting. Almost from the first pages, the authors enter into a game with the reader, literally guessing the course of his thoughts, and through dialogue show how you can come to the right decision.

The material in the book is significantly simplified in comparison with the language of mathematics. Despite this, the book cannot be classified as one that can be read in one evening. I think that an interested reader who has taken it in hand will not regret the time spent.

Text provided by the copyright holder http://www.litres.ru/pages/biblio_book/?art=8649584

"Game theory. The Art of Strategic Thinking in Business and Life / Avinash Dixit and Barry Nailbuff”: Mann, Ivanov and Ferber; Moscow; 2015

ISBN 978-5-00057-311-2

annotation

Game theory is rigorous strategic thinking. It is the art of predicting your opponent's next move, coupled with the knowledge that he is doing the same. The main part of the theory contradicts the usual worldly wisdom and common sense, therefore, its study can form a new view of the structure of the world and the interaction of people. Using examples from cinema, sports, politics, history, the authors show how almost all companies and people are involved in interactions described by game theory. Knowing this subject will make you more successful in business and life.

Barry J. Nailbuff, Avinash Dixit

Game theory. The art of strategic thinking in business and life

Avinash K. Dixit, Barry J. Nalebuff

The Art of Strategy:

A Game Theorist's Guide to Success in Business and Life

Scientific editor Nadezhda Reshetnik

Published with permission from W.W. Norton & Company, Inc. and literary agency Andrew Nurnberg

Legal support for the publishing house is provided by Vegas Lex law firm.

Foreword by the publication partner

Game theory is a branch of mathematics that studies the choice of optimal strategies in conflict situations in which there is a struggle between participants. Each side pursues its own interests and seeks the most profitable solution, possibly to the detriment of rivals. The simplest examples of such games are chess, card games, sports. All of them are conducted according to set rules that cannot be violated. But in real life, rivals can do anything to win: they threaten, manipulate, deceive, for example, the relationship between parents and a naughty child.

For me, getting to know game theory became intuitive. This happened when I started working with large clients: negotiations with them required more thorough preparation. In small and fast transactions, it is important to know the product perfectly and understand the needs of the client. When it comes to large sums, the strategy of the client's behavior, his interests, alternatives and goals are of particular importance. Long negotiations and meetings really resembled a game in which I always aimed for both sides to emerge victorious. The same games also take place between a manager and a subordinate - for example, when it comes to changing wages or setting a difficult task. Therefore, I read this book with excitement, because in it everything that was incomprehensible to me turned out to be a long-thought-out model of behavior.

Ivan Samolov,

marketing director

To all our students, from whom we have learned a lot (especially Seth. – B.N.)

Foreword

WE DID NOT PLAN TO write a new book. We were only going to make the necessary changes and additions to our previous book, Strategic Thinking. But everything turned out differently.

One of the reasons why we decided to revise and correct the previous edition of the book can be explained by the example of Jorge Luis Borges' hero, Pierre Menard, who decided to rewrite Cervantes' novel Don Quixote. With a lot of effort, Menard created a new version of the novel, word for word repeating the original. However, 300 years have passed since Don Quixote was published. Menard used the same words in his novel, but endowed them with a completely different meaning.

Alas, our original text is not equivalent to Don Quixote, so we still had to change something in the revised and corrected edition. In reality b about Most of the book contains completely new material. New applications, new concepts and new points of view have emerged. Since the publication of the first book, so many new things have appeared that we have seen fit to give this edition a new name. On the other hand, although we use new words, the intent remains the same. We want to change your perception of the world around you and help you think strategically by introducing the concepts and logic of game theory.

Like Pierre Menard, we also have a new point of view on what is happening. When we wrote Strategic Thinking, we were younger; in addition, the idea of self-centered competition dominated in those days. Since then, we have fully understood the importance of cooperation in strategic situations and why a good strategy must necessarily be an acceptable combination of competition and cooperation (one of us wrote a book on this topic: Competitive Cooperation in Business).

I would like to think that The Art of Strategy reflects this more mature and wiser point of view. But there is also continuity. While we offer more real-life stories in this new edition, our goal remains the same: to help you develop your way of thinking in the strategic situations you will face. This is not a business travel book offering "seven steps to guaranteed strategic success." The situations you will face will be so varied that you will get better results by knowing some general principles of strategy building and adapting them to the strategy games you play.

Game theory is a relatively young science, a little over seventy years old, but it has already provided a lot of useful information for practicing strategists. But like all other sciences, game theory is too overloaded with special terminology and mathematical calculations. These are undeniably important tools for scientific research, but they limit the circle of people who can understand the basic concepts of game theory to specialists in this field. The main motive for writing Strategic Thinking was our conviction that game theory is too interesting and important to limit its scope to publications in academic journals. The basic concepts of this theory can be useful in many areas, including business, politics, sports, and even in everyday social interaction. That is why we have formulated the most important concepts of game theory in a more understandable language and have replaced purely theoretical reasoning with real-life examples.

We are pleased that this point of view is gaining ground. Game theory is one of the most popular elective courses at Princeton and Yale, as well as at most other institutions that teach it. Game theory is one of the most important parts of MBA strategy courses, and Google search results for "game theory" are linked to millions of pages. Mentions of game theory can be found in newspaper articles, columns of commentators and socio-political discussions.

Much of the credit for the development of game theory belongs to the Nobel Committee for Economics, which awarded two Nobel Prizes in game theory: in 1994 to John Harsanyi, John Nash and Reinhard Selten and in 2005 to Robert Aumann and Thomas Schelling. A huge contribution to the popularization of game theory was made by Sylvia Nazar, who wrote the best-selling biography of John Nash, A Beautiful Mind: The Life of Mathematical Genius and Nobel Laureate John Nash, as well as the creators award-winning feature film of the same name, and the authors of many other books on the subject. Perhaps this is our merit: the book "Strategic Thinking" sold 250,000 copies. It has been translated into many languages and has become a bestseller in Japanese and Hebrew.

We owe a lot to Thomas Schelling. His work on nuclear strategies, in particular The Strategy of Conflict and Arms and Influence ("Weapons and Influence") received well-deserved fame. In fact, Schelling pioneered game theory while he was doing research on nuclear conflicts. Equally important and significant is Michael Porter's book Competitive Strategy, which applies the basic concepts of game theory in the context of business strategy. Our comments and links to books by Thomas Schelling, Michael Porter, and many other authors can be found at the end of the book, in the "Further Reading" section.

We do not tie the ideas in this book to a specific context, but rather provide a wide range of examples for each of the basic principles of game theory. This means that readers with different levels of education and different professional skills will find something useful in this book; find that the same principles guide strategies in less familiar situations. We hope that this will allow them to take a fresh look at many events of the past and present. While working on the book, we relied on the experience of a large number of readers who shared with us examples from various spheres of life, such as literature, cinema and sports. Serious scholars may think that this oversimplifies the topic of strategy, but we are convinced that familiar examples are an effective tool for clarifying important ideas.

The idea of writing a book at a more accessible level than it is university course, suggested Hal Varian, who is now Google's chief economist and professor emeritus at the University of California, Berkeley. In addition, he shared with us many interesting ideas and comments about the first drafts of the book. Drake McFeely of W. W. Norton was an excellent, if strict, editor of Strategic Thinking. He put a lot of effort into turning our academic manuscript into a lively, interesting text. Many readers of the previous edition sent in their approval, advice, and critiques, which greatly helped us in the creation of The Art of Strategy. At the risk of missing someone, we cannot fail to name here those people to whom we want to express special thanks. Our collaborators on various books, Ian Ayres, Adam Brandenburger, Robert Pindyke, David Reilly and Susan Skeet generously shared with us a very useful information. This book, as well as Strategic Thinking, was heavily influenced by David Austen-Smith, Alan Blinder, Seth Masters, Benjamin Polak, Karl Shapiro, Terry Vaughn, and Robert Willig. Jack Repcheck of W. W. Norton has been a constant source of support and understanding as a very insightful editor of The Art of Strategy. Our manuscript editors Janet Byrne and Katherine Pichotta generously corrected our errors. If you find no mistakes in our book, you should thank them for it.

We want to give special thanks to Andrew St. George, literary critic for the Financial Times. Calling Strategic Thinking the most interesting book he read in 1991, he said, "It's like going to the gym to train your mind" (Financial Times Weekend, December 7-8, 1991). This led us to the idea of calling some of the most exciting challenges we pose to our readers “thinking challenges.” Finally, John Morgan of the University of California at Berkeley gave us a powerful impetus by threatening, "If you don't put out a revised and revised edition, I'll write a rival book." And when we saved him from such worries, he helped us with his ideas and suggestions.

Avinash Dixit