T he picture is showing the Prisoner’s dilemma in a Matrix. This is used to understand clearly the possible choices when a company has to make an important decision: a strategic decision.
Imagine two prisoners held in separate cells, interrogated simultaneously, and offered deals (lighter jail sentences) for betraying their fellow criminal. They can “cooperate” (with the other prisoner) by not snitching, or “defect” by betraying the other. However, there is a catch; if both players defect, then they both serve a longer sentence than if neither said anything. Lower jail sentences are interpreted as higher payoffs (shown in the table).
The prisoner’s dilemma has a similar matrix as depicted for the coordination game, but the maximum reward for each player (in this case, 3) is obtained only when the players’ decisions are different. Each player improves their own situation by switching from “cooperating” to “defecting”, given knowledge that the other player’s best decision is to “defect”. The prisoner’s dilemma thus has a single Nash equilibrium: both players choosing to defect.
What has long made this an interesting case to study is the fact that this scenario is globally inferior to “both cooperating”. That is, both players would be better off if they both chose to “cooperate” instead of both choosing to defect. However, each player could improve their own situation by breaking the mutual cooperation, no matter how the other player possibly (or certainly) changes their decision.
Nash equilibrium has been demonstrated by J. Nash in a real situation.
In game theory, the Nash equilibrium is a solution concept of a non-cooperative game involving two or more players in which each player is assumed to know the equilibrium strategies of the other players, and no player has anything to gain by changing only his own strategy.
In Europe I do not know anybody else, except Casaqa, who is trying to integrate quality management and business management systems. I’ve formed a very definite opinion about this and why the quality management system is believed to be so distance to the business management. I would like to share it.
1) The food company are particularly narrow-minded about the different processes, and I think we’ll just have not to compartmentalize everything.
2) The people don’t know the applications of the Game Theory.
3) They also think that management systems must necessarily derive from an external scheme, often imposed by supermarkets, and that nothing can be proposed from within the same companies as in the automotive business happens.
Game theory is a major method used in mathematical economics and business for modeling competing behaviors of interacting agents. Applications include a wide array of economic phenomena and approaches, such as auctions, bargaining, mergers & acquisitions pricing,fair division, duopolies, oligopolies, social network formation, agent-based computational economics, general equilibrium, mechanism design, and voting systems; and across such broad areas as experimental economics, behavioral economics, information economics, industrial organization, and political economy.
I believe that game theory should be use in the Quality Management System too.
Business is a high-stakes game.The way we approach this game is reflected in the language we use to describe it. Business language is full of expressions borrowed from the military and fro sports. Some of them are dangerously misleading. Unlike war and sports, business is not about winning and losing. Nor is it about how well you play the game. Companies can succeed spectacularly without requiring others to fail. And they can fail miserably no matter how well they play if they make the mistake of playing the wrong game.
The essence of business success lies in making sure you’re playing the right game. How do you know if it is the right game? What can you do about it is the wrong game?
In order to help managers answer those questions, I am using a framework (developed by Adam Brandeburg, Barry J. Nalebuff, but updated through Alexander Ostoerwalder) that draws on the insights of the game theory. Basically game theory is about to change the game of business, updating your model business. The point is to use this method into your quality system. The decision taking process is a process like the “maintenance” or the “production”.
The game of business is all about value: creating it and capturing it. Who are the participants in the enterprise? To describe them some Author introduce the Value Net – a schematic map designed to represent all the players in the game and the interdependencies among them.
The Value Net reveals two fundamental symmetries in the game of the business:
a) the first between customers and suppliers
b) the second between substituotors and complementors.
Managers understand intuitively the along the vertical dimension of the Value Net, there is a mixture of cooperation and competition.
This method is very interesting to manage the “process decision ” and to give a tool to analyze the reality as a game. This means to help the managers and to give a contribution to achieve a Quality Management System that can include the ” business model management” .