Opportunity cost is the value of the best alternative that you miss out on as a result of choosing a certain option. For example, if a person chose to invest in a certain venture, their opportunity cost is the money they could have made by investing elsewhere, and namely in the best alternative venture …
Precommitment is a technique where you intentionally limit the future options available to you, to ensure your commitment to some course of action. Generally, precommitment involves eliminating options that you want to avoid (e.g., by throwing out unhealthy food from your house), making those options more difficult to choose (e.g., by putting unhealthy food …
Strategic dominance is a state in game theory that occurs when a strategy that a player can use leads to better outcomes for them than alternative strategies. Accordingly, a strategy is dominant if it leads a player to better outcomes than alternative strategies (i.e., it dominates the alternative strategies). Conversely, a strategy is dominated …
Brinkmanship is a strategy that involves pushing volatile engagements to the brink of active conflict, with the goal of achieving a positive outcome for yourself. For example, in the context of an important negotiation, brinkmanship could involve telling the opposing party that if they won’t agree to all your demands right now, then you’ll …
Roland, Harry, and Billy are three outlaws who recently arrived at the town of Deadwood. After realizing there’s not enough room for the three of them in this town, they decide to meet at the town center at noon, and duel to the death. The rules of the duel are simple: each one, in …
In game theory, a smart player accounts for the fact that the choices that other players make reveal a lot about their position. This article will show you how this concept works and how you can take advantage of it, by looking at the example of the Money Envelope game. The setting Richard and …
One of the basic principles in game theory is that you should look forward and reason back. Essentially, this means that before making a move, you should consider all the possible moves that you and the other players can make, together with the possible outcomes that these moves lead to. Then, consider how desirable each outcome …
“Sailboat racing offers the chance to observe an interesting reversal of a ‘follow the leader’ strategy… The leader imitates the follower even when the follower is clearly pursuing a poor strategy. Why? Because in sailboat racing (unlike ballroom dancing) close doesn’t count; only winning matters. If you have the lead, the surest way to …