Strategic Thinking What is Strategic Thinking Game Theory Applications to Business Applications to Life This slideshow was written by Ken Chapman, but is substantially based on concepts from Thinking Strategically by Avinash K. Dixit and Barry J. Nalebuff, W.W. Norton 1991.

Survivor: Picking Sticks Rules: 12 Sticks During a player’s turn each person can pick 1-3 sticks. Last person to move wins 12 11 10 9 8 7 6 5 4 3 2 1 This slideshow was written by Ken Chapman, but is substantially based on concepts from Thinking Strategically by Avinash K. Dixit and Barry J. Nalebuff, W.W. Norton 1991.

Survivor: Picking Sticks Is there a winning strategy? This slideshow was written by Ken Chapman, but is substantially based on concepts from Thinking Strategically by Avinash K. Dixit and Barry J. Nalebuff, W.W. Norton 1991.

The Cambridge May Ball Casino Night Roulette Play Money Winner gets ticket to the ball In the final round Barry has $700, and Eva $300 This slideshow was written by Ken Chapman, but is substantially based on concepts from Thinking Strategically by Avinash K. Dixit and Barry J. Nalebuff, W.W. Norton 1991.

The Cambridge May Ball Roulette What should each person do? Numbers 0-36 0 is green 1-36 odd numbers are Red, even are black Betting $1 on Red wins with prob 18/37 and pays $2 Betting $1 on a multiple of 3 wins with probability 12/37 and pays $3. What should each person do? This slideshow was written by Ken Chapman, but is substantially based on concepts from Thinking Strategically by Avinash K. Dixit and Barry J. Nalebuff, W.W. Norton 1991.

What do the May Ball and Survivor Games Have in common? This slideshow was written by Ken Chapman, but is substantially based on concepts from Thinking Strategically by Avinash K. Dixit and Barry J. Nalebuff, W.W. Norton 1991.

Forecasting Stock Performance Bob is a veteran predictor of stocks. His predictions appear on a popular Web-Site Each Monday Morning. Jim is unknown If his stocks perform better than Bob’s he may attract attention If his stocks perform the same or worse than Bob’s he remains unknown. When should Bob post his picks on his web-site? How should he make his choices? This slideshow was written by Ken Chapman, but is substantially based on concepts from Thinking Strategically by Avinash K. Dixit and Barry J. Nalebuff, W.W. Norton 1991.

America’s Cup A two boat sailing race The Australian boat starts out behind This slideshow was written by Ken Chapman, but is substantially based on concepts from Thinking Strategically by Avinash K. Dixit and Barry J. Nalebuff, W.W. Norton 1991.

It’s your move Charlie Brown Lucy: “I’ll hold the ball, you come running up and kick it Charlie Brown” Charlie Brown “This year I’m gonna kick the ball out of the universe.” This slideshow was written by Ken Chapman, but is substantially based on concepts from Thinking Strategically by Avinash K. Dixit and Barry J. Nalebuff, W.W. Norton 1991.

Look Ahead and Reason Back This slideshow was written by Ken Chapman, but is substantially based on concepts from Thinking Strategically by Avinash K. Dixit and Barry J. Nalebuff, W.W. Norton 1991.

New Cleaners & Fast Cleaners Vacuum Cleaners Existing company Fast Cleaner’s Vacuums Potential Entrant: New Cleaners Post Entry choices for Fast Cleaners Accommodate entry Fight a price war This slideshow was written by Ken Chapman, but is substantially based on concepts from Thinking Strategically by Avinash K. Dixit and Barry J. Nalebuff, W.W. Norton 1991.

New Cleaners & Fast Cleaners Accommodate $100,000 to New Cleaners Fast Cleaners Enter Price War $-200,000 to New Cleaners Newcleaners $0 to New Cleaners Keep Out This slideshow was written by Ken Chapman, but is substantially based on concepts from Thinking Strategically by Avinash K. Dixit and Barry J. Nalebuff, W.W. Norton 1991.

New Cleaners & Fast Cleaners Accommodate $100,000 to New Cleaners $100,000 to Fast Cleaners Fast Cleaners Enter Price War $-200,000 to New Cleaners -$100,000 to Fast Cleaners Newcleaners $0 to New Cleaners Keep Out This slideshow was written by Ken Chapman, but is substantially based on concepts from Thinking Strategically by Avinash K. Dixit and Barry J. Nalebuff, W.W. Norton 1991.

Bargaining: Ice-Cream Pie Take-it-or-leave-it offers The pie is melting This slideshow was written by Ken Chapman, but is substantially based on concepts from Thinking Strategically by Avinash K. Dixit and Barry J. Nalebuff, W.W. Norton 1991.

Politics and the High Road Obama Wins Clinton Low Road Clinton has a chance High Road Obama Clinton has a chance High Road Obama has incentive to keep the decision a secret. The general principle is that for the look ahead and reason back solution to work, the second player must be able to observe the first. Low Road Clinton Low Road Obama Wins This slideshow was written by Ken Chapman, but is substantially based on concepts from Thinking Strategically by Avinash K. Dixit and Barry J. Nalebuff, W.W. Norton 1991.

1984 Orange Bowl Nebraska is undefeated, U. of Miami has one loss prior to the Orange Bowl If Nebraska wins or ties the game it wins the national title In the 4th quarter Miami led 31-17 Nebraska score two touchdowns On the second touchdown Nebraska goes for the win by trying 2-point extra point. They fail, and lose. Argue that they should have gone for two points on the first touchdown. This slideshow was written by Ken Chapman, but is substantially based on concepts from Thinking Strategically by Avinash K. Dixit and Barry J. Nalebuff, W.W. Norton 1991.

Dominant Strategies Professor Jones choosing the right grail Baseball: 2-outs, 2-strikes, runner on first This slideshow was written by Ken Chapman, but is substantially based on concepts from Thinking Strategically by Avinash K. Dixit and Barry J. Nalebuff, W.W. Norton 1991.

Time and Newsweek Newsweek’s Choices AIDS Budget Time’s Choices 35* / 35** 70* / 30** 30* / 70** 15* / 15** Illustrates a dominant strategy equilibrium *Magazine sales for Time; ** Magazine sales for Newseek This slideshow was written by Ken Chapman, but is substantially based on concepts from Thinking Strategically by Avinash K. Dixit and Barry J. Nalebuff, W.W. Norton 1991.

A different situation Newsweek’s Choices AIDS Budget Time’s Choices 42* / 28** 70* / 30** 30* / 70** 18* / 12** If your opponent has a dominant strategy…assume they will use it This slideshow was written by Ken Chapman, but is substantially based on concepts from Thinking Strategically by Avinash K. Dixit and Barry J. Nalebuff, W.W. Norton 1991.

Football 3* 7* 15* 9* 8* 10* Defense’s Strategies Counter Run Counter Pass Blitz Offense’s Strategies Run 3* 7* 15* Pass 9* 8* 10* Eliminate any dominated strategies from consideration, the re-examine and see if there are more. * Offense’s expected yardage gain This slideshow was written by Ken Chapman, but is substantially based on concepts from Thinking Strategically by Avinash K. Dixit and Barry J. Nalebuff, W.W. Norton 1991.

Missile warfare C Iraqi Ship F B E A I H D American Ship G Iraqi ship is about to fire a missile at the American ship The American ship has missile defense. The anti-missile has only fuel for one minute Missile goes in straight line or turns every 20 seconds H D American Ship G This slideshow was written by Ken Chapman, but is substantially based on concepts from Thinking Strategically by Avinash K. Dixit and Barry J. Nalebuff, W.W. Norton 1991.

Table of Hits and Misses Iraqi Strategy A M E R I C N 1-IFCB 2-IFEB 3-IFED 4-IFEH 5-IHGD 6-IHED 7-IHEB 8-IHEF 1-ABCF H O 2-ABEF 3-ABEH 4-ABED 5-ADGH 6-ADEH 7-ADEF 8-ADEB For American’s ….A2 is dominated by A4; A4 also dominates A3, A6 and A7 A1 is dominated by A8 This slideshow was written by Ken Chapman, but is substantially based on concepts from Thinking Strategically by Avinash K. Dixit and Barry J. Nalebuff, W.W. Norton 1991.

Dominated Strategies Iraqi Strategy A M E R I C N H O 1-ABCF 2-ABEF 1-IFCB 2-IFEB 3-IFED 4-IFEH 5-IHGD 6-IHED 7-IHEB 8-IHEF 1-ABCF H O 2-ABEF 3-ABEH 4-ABED 5-ADGH 6-ADEH 7-ADEF 8-ADEB This slideshow was written by Ken Chapman, but is substantially based on concepts from Thinking Strategically by Avinash K. Dixit and Barry J. Nalebuff, W.W. Norton 1991.

Reduced Table of Hits and Misses Iraqi Strategies American Strategies IFCB IHGD ABED O H ADEB No dominated strategies left…no dominant strategies. But there may be an equilibrium. This slideshow was written by Ken Chapman, but is substantially based on concepts from Thinking Strategically by Avinash K. Dixit and Barry J. Nalebuff, W.W. Norton 1991.

Nash Equilibrium Definition Feast: Too many equilibria Famine Standards: Driving on the right side of the road. Phone connection breaks off: Who calls back Famine Re-examine the Missile game Mixed Strategies This slideshow was written by Ken Chapman, but is substantially based on concepts from Thinking Strategically by Avinash K. Dixit and Barry J. Nalebuff, W.W. Norton 1991.