In many situations, acting for oneself as well as the group gets the best results.
Shyam Ponappa | January 6, 2022
The start of the year is a good time to consider getting past fractiousness. For this purpose, insights and concepts from Game Theory when applied to most interactions in daily living are truly astounding. One major insight is that barring conflict and competitive games and sports, in recurring, purposeful interactions between people and entities, the interests of parties dealing with one another are often not diametrically opposed, even when there is competition between them. The implication is that one party’s gain in an interaction need not be entirely at the other’s cost. These are the non-zero-sum situations that lend themselves to cooperation and collaboration. In these circumstances, the best outcomes arise when parties do what is best for themselves as well as the group. Paradoxically, if parties act only in their own interests, ignoring the potential for collective gains, the outcomes often are short of optimal. Whereas if parties cooperate and collaborate in a convergent way, optimal outcomes are possible.
The difficulty is that this philosophy is apparently at odds with our processes and practices in politics, governance, and administration, which seem to emphasise dissension, divisiveness, and factionalism. This appears to be true to some extent in civil society. Is it possible to have these dichotomous approaches flourish simultaneously in any society? Perhaps not. Yet, for galvanising major change, the convergence of society and a transformation towards cooperative and collaborative culture are imperative.
Non-Zero-Sum Situations & Potential For Gains
This concept is usually presented as numbers in tables with rows and columns and associated mathematical formulas as shown in Chart 1,
For formulas: https://en.wikipedia.org/wiki/Cooperative_game_theory
but it can also be presented graphically as in Chart 2.
Chart 2
Visual representations are sometimes more intuitively understandable. Take for example, corporate acquisition with cooperation and coordination. Consider two companies with complementary strengths, negotiating for one to acquire a stake in the other. The example could be of a manufacturer buying a stake in a supplier for existing or new markets, or diversifying into a new market. The Acquirer A in Chart 2 wishes to pay no more than a reasonable price, shown as a reduction in the asking price as one moves to the right on the horizontal axis. The Seller S wishes to limit the percentage stake sold along the vertical axis with its relinquishment of control, while obtaining a sizeable investment to enhance its capacity. If both sides stick to their “indicated” and “offered” prices at or near the origin, N, the transaction would mean a low investment for a low stake, which would be least beneficial for both. Neither party can improve its position independently from this low-value equilibrium, known as the Nash or Non-Cooperative Equilibrium.
Goal: Stable Cooperative Equilibrium
Any point on the chart towards the right or the top gives both higher gains, although only some will be acceptable to both. The Acquirer gains with less reduction in acquired shares (lower on the vertical axis) for a given investment. Its responses are shown on the line NA (A’s “response function”) extending to the top right. The Acquirer’s preferred price is at the point labelled Acquirer’s Bliss Point. The Seller gains as the stake sold for that price is reduced, up to its ideal Bliss Point, shown on its response function NS. Indifference curves radiate from each Bliss Point, and the points where these curves touch each other (are tangential) represent acceptable settlement points. The line through these points is the acceptable Contract Curve, and the actual settlement point on this curve depends on the negotiation. Any settlement point gives the Acquirer a higher price cut than at N, while the Seller gives up less shares than at N. Both gain.
This is all nice and utopian, but is it of any practical use? The chart shows that objective analysis can highlight the potential for better payoffs, whereas efforts to maximise selfish gains while ignoring common interests results in the lowest payoffs (Nash Equilibrium). That is, in non-zero-sum situations, if players cooperate, any coordinated settlement will be better for both than the Nash Equilibrium.
Game Theory has its limitations, of course, and some question its basic legitimacy because of assumptions not related to this example, such as rational decision-making, with complete knowledge and understanding. For practical applications in group functioning and processes, however, its principles and concepts relating to cooperation are invaluable. There are also a number of other real-world applications, such as for matching medical residents with hospitals in the USA through the National Resident Matching Program,1 shared railway infrastructure costs in Europe, or the brilliant Spliddit.org not-for-profit portal, for apps to help users allocate costs or profits in instances such as sharing rent, fares, credit, goods, and tasks. The benefits of collective action begin with cooperation, or acting with others in one’s own interests. It extends with collaboration, or acting with others on collective goals.
These simple principles can be learned through methods in experiential learning, which employ cooperation and collaborative learning methods. They can be grasped and internalised by young children as well as by adults.2 In this sense, this approach can be facilitated throughout people’s lifetimes. While it is undoubtedly beneficial to learn these in early childhood, people can be introduced to it later, in college or at work, and still learn and apply it well. Given its potential for a cultural transformation, it needs national and state championing through dedicated effort, and a curriculum to inculcate these practices in everyone, from early kindergarten to high-school and beyond, through college and Continuing Education at work and in life.
Without transforming society from a neutral or contentious to a collaborative stance, expecting public-private-partnerships to work is unrealistic. Communications systems enable widespread introduction of these changes, with relevant skilling and training as never before. The question is whether we can step up to the opportunity.
Shyam (no space) Ponappa at gmail dot com
1. National Resident Matching Program, USA: https://www.nrmp.org;
Railways Infrastructure – Europe: http://dm.udc.es/profesores/ignacio/gptren160499.pdf;
Cost or profit allocation for rent, fares, credit, goods, and tasks: http://www.spliddit.org/
2. Collaborative Experiential Learning - Indicative Article:
