Strategy

Stackelberg Competition: The Advantage of Moving First In chess, moving first is a small advantage. In business, moving first can be worth billions. Amazon dominated e-commerce by moving first Google captured search by moving first Facebook dominated social networking by moving first But moving first isn’t always good: Microsoft’s Zune failed against the iPod Google+ failed against Facebook Many “first-mover” startups fail while fast followers succeed When does moving first help? When does it hurt? ...

Backward Induction: Solving Games by Working Backwards You’re playing chess. How do you decide your next move? Master players don’t just think one move ahead — they think many moves ahead, anticipating their opponent’s responses, then their own responses to those responses, and so on. This is backward induction — one of game theory’s most powerful techniques. Instead of reasoning forward from the start, you reason backward from the end. ...

Mixed Strategies: Why You Should Be Unpredictable You’ve learned about dominant strategies and Nash equilibria in pure strategies. But what happens when there’s no pure strategy Nash equilibrium? What if being predictable is your worst enemy? Welcome to the world of mixed strategies — where randomness becomes your most powerful weapon. The Problem with Being Predictable Imagine you’re a goalkeeper facing a penalty kick. You can dive left or right. The striker can shoot left or right. If you both go the same way, the striker scores. If you guess correctly, you save. ...

Repeated Games: How Cooperation Emerges from Self-Interest In the Prisoner’s Dilemma, rational players defect. In the Tragedy of the Commons, rational actors destroy shared resources. One-shot game theory seems to paint a bleak picture: selfishness always wins. But real life isn’t a series of one-shot games. We interact with the same people, companies, and countries repeatedly. And this changes everything. Welcome to repeated games — where cooperation emerges not from altruism, but from enlightened self-interest. ...

Imagine a game where one strategy is best no matter what your opponent does. You don’t need to predict their behavior, guess their intentions, or outthink them. You just pick the dominant strategy and you’re done. This is the simplest situation in game theory—and when you have a dominant strategy, your decision becomes trivial. Let’s understand this powerful concept. What is a Dominant Strategy? A dominant strategy is a strategy that gives you a better outcome than any other strategy, regardless of what your opponents do. ...

In poker, every dollar you win comes from someone else’s loss. In chess, one player wins and one loses. In tennis, your point is your opponent’s lost opportunity. These are zero-sum games—pure competition where one player’s gain equals another’s loss. Understanding zero-sum games changes how you compete, negotiate, and think about conflict. Let’s explore this fundamental concept. What is a Zero-Sum Game? A zero-sum game is a situation where the total gains and losses always sum to zero. Whatever one player wins, another must lose. ...