Several factors in today’s economic environment should propel game theory to a prominent place in corporate strategy. Our model shifts game theory from a tool that generates a specific answer to a technique for giving informed support to managerial decisions. The key is to use the discipline to develop a range of outcomes based on decisions by reasonable actors and to present the advantages and disadvantages of each option.
Our work on European passenger rail deregulation and other business issues shows that game theory can provide timely guidance to managers as they tackle difficult and, sometimes, unprecedented situations. When they do employ this discipline, it’s often misused to provide a single, overly precise answer to complex problems. Yet many managers are wary of game theory, suspecting that it’s more theoretical than practical. In times of uncertainty, game theory should come to the forefront as a strategic tool, for it offers perspectives on how players might act under various circumstances, as well as other kinds of valuable information for making decisions.
