It can be a fairly straightforward model of a repeated prisoners' dilemma. I will assume that you prefer a monogamous relationship, but can be tempted to cheat. You value each period in the future less than today at some discount rate less than 1. Special thanks to SimpliSafe for sponsoring this episode! Get SimpliSafe, the award-winning, easy to use home security system w/ no contract! They learn game theory in the process. You know the drill: Biology professor tells students their upcoming exam is going to be insanely difficult. But that's okay, he says, you can cheat! Game theory definition is - the analysis of a situation involving conflicting interests (as in business or military strategy) in terms of gains and losses among opposing players. Making strategy and game theory Interactive: When the consequence of a manager’s decision depends on both the manager’s own action and the actions of others There are no unconditional optimal strategies in game theory; the optimality of a strategy depends on the situation in which it is implemented Managerial Economics: Unit 7 - Game.

Applying Game Theory to the Workplace

By Chris Comer

If you studied political science in school you inevitably learned about Nash’s Equilibrium, often through the Tragedy of the Commons or The Prisoner’s Dilemma. Dr. John Nash’s theory states individual actors working together for a collective good will be more successful than individual actors competing against each other for their own self-interest. However individual actors working together will only produce the best output if they abide by a set of rules to essentially ensure no single actor cheats or breaks a rule to gain an advantage over another actor.

Nash’s equilibrium was originally intended in the field of economics as it expanded upon Adam Smith’s theory that through economic competition individual ambition serves the common good. Nash explains the best outcome is achieved when individual actors do what is best for him/herself as well as the group. This theory has been expanded to justify very necessary antitrust laws and explains the necessity for international organizations like the United Nations, International Monetary Fund, and International Criminal Court in an otherwise international state of anarchy.

However, scale back the grandeur of Dr. Nash’s theory and apply it to everyday life. Inside the beltway of Washington, D.C. office politics is unsurprisingly common in a city centered on politics. Admittedly, this is much more prevalent in smaller offices, organizations, or startups where there is not a strict corporate structure. So let’s apply Game Theory to these types of offices or workplaces.

Imagine you are an owner, CEO, president, or simply a member of upper management. Office politics will inevitably rear its ugly head in a multitude of ways: whisper campaigns, rumor mills, etc. But the real punches thrown in office politics occur when a member of a team goes to a superior to complain, spread a rumor, or express an unwarranted concern about a certain co-worker. If you can imagine your workplace as a game, consider this a cheating move.

Here is an example of Game Theory in action in a workplace. Employee 1 and Employee 2 are working on different parts of the same project while their manager is not in the office. Employee 1 observes Employee 2 making a critical statistical mistake in their work. Employee 2 observes Employee 1 presenting his or her work in a way that is damaging to the company as a whole. Both employees have unknowingly made a mistake and both have two options:

1. Do not confront the other employee with the mistake and report the mistake to management (Report).
2. Confront the other employee and help correct the mistake immediately (Confront).

(This situation assumes all employees involved will not ignore a critical mistake.)

Employee 1 and 2 both have two options each which creates four possible outcomes. Each employee has the ability to score between 0 and 5 (office) political points.

Outcome 1: Both employees choose option two and confront each other on their respective mistakes. The mistakes are corrected immediately and work output increases. Employee 1 receives a score of 4; Employee 2 receives a score of 4.

This outcome produces the best overall result for all parties involved. This creates the best output for the office as a whole as the mistakes are caught and corrected immediately. Management is happy because problems are being solved immediately without their intervention. Both employees do not score their highest possible score but they do increase their personal effectiveness.

Outcome 2: Employee 1 chooses not to confront, reports the mistake the management, and Employee 2 is reprimanded. Employee 2 chooses to confront and Employee 1’s mistake is corrected immediately. Employee 1 receives a score of 5; Employee 2 receives a score of 0.

Outcome 3: Employee 1 chooses to confront and Employee 2’s mistake is corrected immediately. Employee 2 chooses not to confront, reports the mistake the management, and Employee 1 is reprimanded. Employee 2 receives a score of 5; Employee 1 receives a score of 0.

Outcome 2 and 3 allow one employee to benefit from the mistakes of their fellow employee. While this outcome is great for personal advancement, it is not what is best for office output as one employee is left repeating a mistake until they are reprimanded by management. Both of these options also breed mistrust between individual employees as well as resentment between employees and management.

Outcome 4: Both employees chose to report the mistake to management to avoid direct conflict. Both employees are separately rewarded for discovering the mistake and separately reprimanded for their individual mistakes. Work output suffers due to the delay. Employee 1 receives a score of 2; Employee 2 receives a score of 2.

Game Theory Involving Teams Cheating Needs

This final outcome is common in combative workplaces. In this situation output decreases, mistrust increases, and morale plummets. In worst case scenarios, work is no longer completed to achieve a goal but rather to score points or defend against attacks.

As a leader, there are ways to prevent office politics for deteriorating productivity.

Rule 1: Encourage dissent in the workplace.

Real friends are those that do not hesitate to let you know when you are making a mistake. The same applies to the workplace. Every employee in the company from the CEO to the mailroom needs to have the humility to accept they are capable of making mistakes. You should encourage your employees to question everything. “How can we be better? Is there a more effective way to do this? How does this help us achieve our overall goals?” These questions create an atmosphere where all employees are constantly bringing new ideas to the table.

Many employers make the mistake of associating dissent with negativity; they are two completely different entities. However, there is productive criticism and poisonous dissent; which comes down to delivery. Criticism is meant to be delivered diplomatically, privately, and to the relevant parties involved in the decision making process. This should always be encouraged. Anything else generally devolves to complaining, kibitzing, etc. Encourage productive dissent and informed positivity.

Organizations that discourage dissent produce such products as Operation Eagle Claw and Operation Iraqi Freedom.

Rule 2: Establish clear and major goals as an organization.

If you do not establish clear goals as an organization that involve every member of the team you are creating an atmosphere for employees to focus on their own personal goals above the greater good. It should be made clear during the hiring process that a new team member is going to be brought on to help the organization (not himself/herself) achieve specific major goals.

Rule 3: Discourage tattling.

Using the scenario from earlier, an effective manager in outcome 2 or 3 should punish, rather than reward, the employee that chose to report over confront. When employees come to a superior to disparage another employee, an astute manager will seek to understand motives. “Is this employee bringing me this information because they are concerned about my organization? Or is this employee trying to bring down another employee?” Using the aforementioned scenario, a manager should immediately ask why the employee didn’t immediately seek to correct the other employee’s mistake. If this employee was truly had the best intentions of the company in mind, they would not be willing to let the mistake be repeated.

There will always be issues which must be handled by members of management. The difficult burden is on management is to define these differences to their staff and interpret conflict through multiple paradigms before reacting.

UN resolutions and international laws are slowly but surely creating an environment that discourage sovereign states from violating international norms to foster fair economic growth. The same foundational theories can be applied to amplify productivity in your office. If these three simple rules are made clear in an office it will help foster a healthy workplace environment in which trust can be built and great things can be accomplished.

I remember playing various board games as a kid with my family and friends…games like parcheesi, The Game of Life, and Monopoly. And of all the games we played, it was that last game on my list that I liked the least (although I would be initially enthusiastic about playing it).

Even though I was young (and lacked the technical vocabulary to describe the phenomenon), I would quickly become aware that the game, as it progressed, seemed to cause a change in the behavior of those who were “winning” (as to my behavior: I cannot recall ever winning the game, and I mostly found it boring)…a change that I would later identify as more cut-throat (or ruthless), and, they were less likely to forgo collecting their due rent from those who had little capital. And, of all the games we played, Monopoly seemed to be the one in which people were more likely to “cheat”, if only in small ways.

But as I was no psychologist or sociologist, I just chalked that all up to the nature of the game…but I retained my distaste for Monopoly (and monopolies) to this day.

A Game of Privilege

Now comes social-psychologist Paul Piff (of the well-known research team of Keltner and Piff) who focuses most of his research on social hierarchies and how these impact our lives and society in general.

In this TED Talk held at TEDxMarin (as in Marin County, CA), Piff discusses a recent series of behavioral experiments centered on the game of Monopoly. These experiments –conducted at the UC Berkeley campus — involved the secret recording of multiple “rigged” games of monopoly in which one randomly-chosen player in a randomly selected group was given certain a priori advantages…such as: twice the money, greater ability to move around the board (more than two dice!), and more access to resources (higher bonuses for passing ‘go’).

According to Piff, the goal here was to study how “a privileged player in a rigged game behaves”. After just fifteen minutes of play for each game, the researchers began noticing “dramatic” behavioral changes in the advantaged players…observed changes ranged from louder, more forceful movement of their game piece (and other “displays of power”) to seemingly trivial things like eating more pretzels.

Game Theory Involving Teams Cheating Questions

In one humorously shocking (or shockingly humorous) example, one of the advantaged players, after successfully winning the game, was heard explaining what he had done, strategically, to succeed and win. This example speaks to “how we make sense of advantage”, says Piff

Over all, the most consistent behavioral change observed is one that may not come as a great surprise to those of us with more worldly experience…manners, or rather, the lack thereof…

The Impact of Social and Economic Hierarchies

According to Piff, the dramatic changes observed in these Monopoly experiments corroborated well with other research he and colleagues had conducted on wealth and what’s known as prosociality (our tendency to cooperate with others and generally concern ourselves with others’ well-being). These previous studies sought to answer a basic question: of two groups — rich and poor — who is more likely to help a stranger?

Using money games (in which some were given more money than others), jars of candy (reserved for sick children), and even hidden camera experiments with real automobile traffic (which cars were more likely to obey the law — stop at a cross walk — for a pedestrian), results of all of these showed a general tendency for wealth and hierarchical status to increase one’s sense of entitlement (and are “more likely to prioritize self-interest over the interests of others”) …while simultaneously decreasing one’s empathy and concern for others.

What’s more, as this hierarchical inequality increases, the impact on individuals and societies — in terms of health, education, social trust, community, incarceration, etc — is profound…general social inequality has a way of spreading and increasing in tandem with the increase in economic inequality.

But do not let all this dishearten you…Piff concludes his talk with a surprising quote from one of the world’s richest men and some inspiring efforts by the privileged class to alleviate this growing social inequality.

So then, watch this truly absorbing and provocative TED talk entitled ‘Paul Piff – Does money make you mean?” (and see my Author’s Comment, below).

Author comment:

Two quick comments here…As a fair-minded individual, I note that a certain “game psychology” operates with Monopoly (and perhaps every other game)…that is: when we consent to play a game, we also consent to the rules, and to the goal, of that game (which is to monopolize)…we also consent to the idea of a winner and a loser…and who willingly consents to a game to become a loser in that game? (for a great reference work and a philosophy of games, see ‘Finite and Infinite Games‘ by James P. Carse…it might change your life).

Game Theory Involving Teams Cheating Stories

Lastly, as to the charitable organizations noted in the video (“helping to alleviate the impacts of social inequality”)…this effort (assuming that it is sincere) would be far better served — in terms of quickly reducing inequality — if the “privileged” members of these groups spent their time and money pressuring Congress to raise the income tax rate on the richest Americans (and their corporations)…and increase the capital gains tax while they’re at it The tax revenue can be earmarked for social programs. This will more effectively reduced income inequality, which is the source of all these other inequalities noted in this video.

Top Image: catwalker / Shutterstock.com'>catwalker / shutterstock.com

Game Theory Involving Teams Cheating Ability