How do you use game theory to predict your competitors' moves?

Understand the different types of games: cooperative versus non-cooperative, zero-sum versus non-zero-sum, and symmetric versus asymmetric. In zero-sum games, one player's gain is another's loss, common in price wars. Non-zero-sum games, like partnerships, allow for mutual gains or losses. Identifying the type of 'game' you're engaged in with competitors is essential for applying the appropriate game theory principles and effectively predicting their actions.

By understanding their potential actions, you can predict their moves. This enables you to plan your own strategy accordingly in order to maximize your outcomes.

Sure, understanding game theory can give you an edge in predicting competitor moves. Start with basics: Cooperative vs non-cooperative, zero-sum vs non-zero-sum, symmetric vs asymmetric games.?? Knowing game type dictates which strategies to use. Recognize all players: competitors, potential entrants, suppliers, customers, and even regulators.?? They have different goals and resources which guide their strategies. Comprehending their constraints enables more accurate predictions. For example, a resource-strapped competitor likely won't risk a costly price war - an insight that helps anticipate their strategic choices.??

From my experience I believe we should define the game first: Players: Identify yourself and your competitors. Strategies: What actions can each player take? Consider pricing, product features, marketing campaigns, etc. Payoffs: What are the desired outcomes for each player? This could be market share, profit, brand recognition, etc.

Identifying all market players is essential. Understanding their goals and constraints allows you to predict their possible actions. For instance, a resource-constrained competitor is unlikely to start an expensive price war. This insight helps you anticipate their strategic choices and position yourself advantageously.

Analyzing payoffs means understanding what each player values and how they define success, such as profits, market share, or customer loyalty. Knowing your competitors' motivations allows you to predict their reactions to various scenarios. For example, if a competitor prioritizes market share over short-term profits, they might use aggressive pricing to attract more customers. Anticipating these moves enables you to strategize and respond effectively.

Rationality: Assume your competitors will act rationally, seeking the best outcome for themselves based on the game definition. Risk Tolerance: Consider if your competitors are risk-averse (preferring stability) or risk-seeking (open to bold moves).

Consideration & Limitations: Incomplete Information: You might not have full knowledge of your competitor's goals, resources, or decision-making process. Bounded Rationality: In reality, competitors might not be perfectly rational and could make emotional or illogical decisions. Multiple Equilibria: Complex scenarios might have several Nash Equilibria, making prediction even trickier.