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November 14, 2005

Game Theory and Alignment via Performance Logic

Susan Gilbert, an associate professor in the practice of finance and associate dean and director of the Evening MBA Program at Emory, gives this definition of game theory:

“Game theory at its simplest level is just a way of representing all possible outcomes of one or more different actions,” explains Gilbert. “Rather than ignoring what your competitor is going to do or making a single assumption of what they’re going to do, you’re going to show all possible reactions and then reason what the most likely action will be.”

"...we try and teach them to think ahead and then reason backwards to what their first move should be based on what their last move should be,” Gilbert says.

This technique is especially pertinent to competitive situations where the uncertainty lies in the approaches of other parties. But for situations where the goal is already defined and the uncertainty is about the relative tolerance multiple stakeholders have for the ways to proceed, something else might be more appropriate.

This entry will be extended over time to explore the difference between the two situations.

Posted by Malcolm Ryder at November 14, 2005 7:15 PM

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