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

To tackle the problem strategists transform simultaneous-move games into sequential-move games. That is where the notion of strategic move comes into play. Strategic move is an action designed to alter beliefs and actions of others in a direction favorable to yourself. Strategic move will purposely limit your freedom but in return it will limit your opponent's freedom. Threats and promises are examples of strategic moves that are widely used. Another example of strategic move explained in the book, brinkmanship, consists in creating and maintaining risk of mutually bad outcome. Unlike the compelling threat, brinkmanship does not secure bad outcome, it does not even tell when it may occur. It is left to your opponent to guess at any point in the game if you are on the brink of disaster. By defying yourself an opportunity to influence the situation and making your opponent understand that he is the only capable to resolve the conflict you induce him to compromise.

Then it comes to multi-person games where interdependence is so complex that the outcome seems absolutely unpredictable. Voting is an example of an imperfect system that cannot aggregate up individuals' preferences into a will of the people. The authors show how result of voting depends on the scheme of voting that gives way for manipulation.

When discussing bargaining the authors explore how different schemes of bargaining change sides' power and affect the result. Time is money for both sides but it is likely that they discount future at different rates thus one side gets competitive edge. Simultaneous bargaining can open up possibility for mutually beneficial trade-off, especially when sides value items differently.

OVERALL: The book is well structured and written in an easy-to-understand language, though in some cases it shows contradictions and some explanations seem oversimplified. It is rich in examples and offers cases from different spheres of life. This book instills mathematical approach to problems without going deep into mathematics. So the book will not put off `mathematically disadvantaged' readers. Even in case this book is the only you read on strategy, you will acquire knowledge that is indispensable nowadays. The book changed my perception of conflicts, games and bargaining.


Great Game Theory book   September 29, 2002
T SANTOSO (Surabaya, Jatim Indonesia)
25 out of 29 found this review helpful

This is my first contact with game theory reading, and i enjoy it very much. It is a required reading at University of Chicago Executive MBA program, Competitive Strategy course.
The content is quiet condense and within everybody's grasp. There is not much mathematical stuff inside, which is good ;-).
It is true that there is much simplification in any game theory, but up to know that is the best possible explaination into the real world, there is no other way to understand the things better. It you are like me, with no prior economic academic background, this book is an eye openner. I enjoy reading it very much. Most of you will.


An Excellent Introduction to Game Theory   December 13, 2001
Pranab Majumder (Chapel Hill, NC United States)
8 out of 8 found this review helpful

By giving extensive examples from real business strategy, Dixit and Nalebuff have created and amzing book on Game Theory for the layman (and MBAs, for that matter).

What I like about the book is that they introduce a new way of looking at strategy by using elements of Game Theory. I particluarly like the many examples where on first sight what looks like a good case for a new business falls flat (and bleeds a lot of money) because the competitive actions of other players are not taken into account.

Nalebuff wrote another book called "Co-Opetition", but I like this one much better. That said, an interested person would still have to learn a lot about game theory and strategy in order to try to avoid some of the mistakes highlighted in this book!


So good I read it twice!   July 29, 1999
dlross21@hotmail.com (Madison, Wisconsin)
18 out of 22 found this review helpful

Interesting game theory book without the math. Too much stuff about labor strikes. A bit too theoretical to be applied directly, but definitely some interesting things to think about. One interesting theoretical proposition, in a 2 person race the leader should mimick all of the moves of the follower, that way the follower will never gain any ground. Best part of book is cited to some journal...

"In 1890 there were three ways to power automobiles - steam, gasoline, and electricity - and one of these was patently inferior to the other two: gasoline... A turning point for gasoline was a 1895 horseless carriage competition sponsored by the Chicago TimesHerald. This was won by a gasoline-powered Duryea - one of only two cars to finish out of six starters - and has been cited as the possible inspiration for R.E. Olds to patent in 1896 a gasoline powered source, which he subsequently mass produced. Gasoline thus overcame it's slow start. Steam continued viable as a power source until 1914, when there was an outbreak of hoof-and-mouth disease in North America. This led to the withdrawl of horse troughs - which is where steam cars could fill with water. It took the Stanley brothers about three years to develop a condenser and boiler system that did not need to be filled every thirty of fourty miles. But by then it was too late. The steam engine hasn't recovered. "

" While there is little doubt that today's gasoline technology is better than steam, that's not the right comparison. How good would steam have been if it had the benefit of seventy-five years of research and development? "

Wow.


Used this during   November 4, 2005
Frodo Baggins (Wisconsin, United States)
6 out of 6 found this review helpful

My college professor used this as one of the books for our game theory course. I was instantly taken by the book. It applied the most common game theory examples to very ordinary circumstances.

For example, it explains that a baseball pitcher does not always want to throw his #1 pitch in a key situation -- there's a percentage of times that he wants to throw it and the book explains how to get that percentage.

It also explains how to outline the various outcomes, think backward and use that to achieve the outcome that you desire.

This is not an academic book, but it teaches. If you're looking for serious acadmic work, you'd do better to look to James Buchanan or Mancur Olson. For the average reader, though, this book is outstanding.