2. THANK YOU

3. What is Game Theory? Relevance for Business Presentation at Griffith College, Dublin August Patrick A. McNutt Visiting Fellow, Manchester Business School, UK & Smurfit Business School, Dublin, Ireland.

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…
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
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 Smartphone Wake Up 7am NFC at coffee shop 825
Leave the house 725am
Transit Smartcard at 745am
Check text messages
Social media
NFC at coffee shop 825
Coffee stop 820am
Texting, FB and ‘Googling’ the weekend plans.
‘Latte to go’ NFC payment at 825am walk to office
At office Log in PC 845
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 surf the net, final texts, web browsing.
Texting, surfing ‘lights out’ by 23.55

9. The Daily Routine
745
825
845
925
1345
1730

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
7am
725
745
NUDGE
820
825
845
925
1230
1345

13. FIND THE PATTERN (the roots of the tree): WHY
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: a.m IN BUSINESS ALSO FIND THE PATTERN Example: SONY v MICROSOFT pattern of prices Nudge zone: pre-2004

14. Δ is the nudge parameter that SEQUENCE-CODE->PREDICTION
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 PS2 launched at $299 PS2 at $199.99 PS2 at $179.99
Announcement PS3 production schedule to ship 6 million units by 31 Mar 07 at $499
PS2 launched at $299
PS2 at $199.99
PS2 at $179.99
PS2 at $149.99
100 million PS2 shipped
PS2 at $129.99
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
20 April 06
8 May 06
11 May 04
22 Nov 05
6 Feb 06
27 April 06
22 million Xbox shipped
Xbox at $179
Microsoft Xbox launched at $299
Revised production schedule for Xbox 360 to million units by 30th June 2006
Xbox 360 launched at $399
Xbox at $199
Xbox at $179
Xbox at $149

16. October 2000 – May 2004 observable pattern ex-post 299. 299. 199. 99
October 2000 – May 2004 observable pattern ex-post 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………
‘Habit is a great deadner’ Samuel Beckett
Waiting for Godot Act II

20. Carry on the conversation
THANK YOU
#GriffithConnects