Griffith College launched its 'Griffith Connects' series of talks with a fascinating talk on the relevance of Game Theory for business by Patrick McNutt.

2. THANK YOU

3. What is Game Theory?
Relevance for Business
Presentation
at Griffith College, Dublin
August 25 2016
Patrick A. McNutt
Visiting Fellow, Manchester Business School, UK
& Smurfit Business School, Dublin, Ireland.
www.patrickmcnutt.com
Follow @tuncnunc

4. Game theory focuses on
individual behaviour
A game unfolds when there is both mutual
interdependence and
action-reaction chain of events
When you modify your behaviour you are enveloped by a
game
You either play to win (historically, a winning strategy ) or
play not to lose (maximin strategy)
Ultimately, you abandon unilateral decision making &
embed an inherited or acquired game DNA

5. SPECIFIC RELEVANCE FOR
BUSINESS?
1. Trade-offs….between variables X and Y
2. Observed Behaviour….known as ‘Nudge’
3. Primary focus on Patterns…..data analytics & prediction
_______________________________________________
So game theory could transform your view of a
competitor
Allows you to shape strategy (smart strategy)

6. Premise: Prediction depends
on finding a pattern
Step 1. find a sequence
2,3,5,8,13,21,34…
Step 2. individual as digital self
repeat behaviour
outsource memory
Step 3 coding the pattern
alpha-numeric: word = 9673
binary 7 = 111
finite order [string]

7. Behaviour at the level of
individual
Theory: We check: Inertia or Habit?
Practice: Can we code the behaviour?
ID the rule (or rules of the game)
+
Influence the players’ belief
=
decoding the pattern
A game is like ‘a behavioural process, a sequence of actions
and reactions at time period t with consequences at time
period t+1’
Lets take an example: The Daily Routine

8. The Daily Routine
SmartphoneWakeUp
7am
Leave the house 725am
Transit Smartcard at
745am
Check text messages
Social media
NFCatcoffeeshop825
Coffee stop 820am
Texting, FB and
‘Googling’ the weekend
plans.
‘Latte to go’ NFC
payment at 825am
walk to office
AtofficeLoginPC845
At desk: 845am Log On
PC, search web. &
texting
925 Receive text
message confirm lunch
1230 for lunch, CC
payment 13.45
1730 Log off PC;
Returning home, smart
card 1814; send text; at
home by 1855 surf the
net, final texts, web
browsing.
Texting, surfing ‘lights
out’ by 23.55

9. The Daily Routine

10. The Daily Routine
A Pattern evolves from
MONDAY,TUESDAY, WEDNESDAY, THURSDAY…
CAN WE PREDICT FRIDAY?
Pattern evolves
WEEK 1, WEEK 2, WEEK 3……
CAN WE PREDICT WEEK 4?

11. Daily Routine Algorithm:
Decision Tree

12. Daily Routine Algorithm:
Decision Tree

13. FIND THE PATTERN (the roots
of the tree):
WHY?
IT IS THE COGNITIVE KEY THAT DECODES
BEHAVIOUR
BT+1 = BT + Δ
IN THE DAILY ROUTINE WE HAVE
Nudge zone: 8.20 - 8.25a.m
IN BUSINESS ALSO FIND THE PATTERN
Example: SONY v MICROSOFT pattern of prices
Nudge zone: pre-2004

14. Information is embedded in observed
behaviour Bt during the time continuum
from t to t+1.
Bt+1 = Bt + Δ
 Δ is the nudge parameter that
policy makers, management, data
pharoahs and strategists can influence.
RANDOMNESS->
NUDGE-PATTERN
SEQUENCE-CODE->PREDICTION

15. PATTERN – 2000-2006
26 Oct 00 15 Nov 01
14 May 02
15 May 02
13 May 03
14 May 03 29 Mar 04
1 Nov 05
30 Oct 05
PS2
launched
at $299
Microsoft Xbox
launched at $299
PS2 at
$199.99
Xbox at
$149
22 million
Xbox
shipped
Xbox at
$199
PS2 at
$179.99
Xbox at
$179
PS2 at
$149.99
11 May 04
100 million
PS2
shipped
Xbox 360
launched
at $399
22 Nov 05
Xbox at
$179
6 Feb 06
20 April 06
PS2 at
$129.99
27 April 06
Revised production
schedule for Xbox
360 to 5- 5.5 million
units by 30th June
2006
8 May 06
Announcement PS3
production schedule to
ship 6 million units by
31 Mar 07 at $499

16. October 2000 – May 2004
observable pattern ex-post
299..299..199.99..199..179.99..179..149.99..149
opening symmetric move…….
…………..
50% price decrease
repeated in 2010 and 2015

17. Cognitive Business
Strategy
1. Thinking about moves or strategy
‘I think-you think-I think’
2. Signaling occurs in a game
Observe the playbook as patterns
Influence the patterns
Code the patterns

18. With signaling
everything is changing
What should I do?
With all the chaotic information available ‘what you are’ and
‘who you are’ defines your Daily Routine and algorithms
convert it into information = a valuable tradable asset, so
Stop and Think.
Know Your Pattern
Observe but do not judge

19. ‘Habit is a great deadner’
Samuel Beckett
Waiting for Godot Act II
Thank you for
listening………

20. THANK YOUCarry on the conversation
#GriffithConnects