Accessible text version of an eleven-slide presentation. Each heading below is one slide, in order.
LER 565, Week 2: Sequential and Zero-Sum Strategies and Their Applications to HR. Instructor: Ryan Lamare.
Our first two strategies are sequential and zero-sum. Sequential strategies: think forward, reason backward, using game trees. Simultaneous zero-sum games: win or lose, and reading a payoff matrix. And how to solve a simple game by finding a dominant strategy that leads to equilibrium.
There are two kinds of strategic interaction. Sequential, where one side moves and the other responds; and simultaneous, where both choose at the same time. Rule one, from Week 1: always put yourself in the other's shoes. Rule two, new this week: think ahead, because every move reshapes the moves that follow. Often you already know, or can infer, what others will do before you decide.
A game tree maps a decision: branches are choices, nodes show whose turn it is, and payoffs sit at the ends. As in Frost's two roads diverged in a wood, the fork is the simplest branch. Look to the future and reason in the present: start at the end and roll back to today's best move. Prune the branches the other side won't take; what's left is the rollback equilibrium. Every tree must show a complete course of action. Related media: Littlefinger counsels Sansa. Open the clip: playing every branch forward in your mind.
A sequential game: the return-to-office decision. The firm moves first, choosing either to mandate return-to-office or to keep work remote-friendly. If the firm mandates return-to-office, workers respond: complying gives payoffs of 2 to the firm and minus 1 to workers; pushing back gives minus 1 to the firm and 1 to workers. If the firm keeps work remote-friendly, payoffs are 1 to the firm and 1 to workers. Anticipating pushback, such as attrition and disengagement, the firm is better off keeping work remote-friendly. Payoffs are shown as firm first, then workers.
First is best? It often pays to move first and set the terms before rivals react, the first-mover advantage. But it is not always best; a fast follower can leapfrog the leader. Two HR examples. On-site childcare: Patagonia was a first mover, opening one of America's first corporate on-site child-care centers in 1983, and rivals still copy it. Time outside: Patagonia set the outdoor-life ethos first, but REI gained a second-mover edge with its Yay Days and the OptOutside campaign. So first is only sometimes best. Related media: Why do competitors open stores next to one another? Positioning when rivals react.
The limits of sequential strategies. Real decision trees get huge, fast, and become too complex to draw to completion. They assume complete information and fully rational players. In practice we are boundedly rational and cannot foresee every branch. So we turn to games where players choose at the same time: simultaneous games.
Simultaneous games and zero-sum thinking. In simultaneous games you choose without knowing the other side's pick, your first taste of incomplete information. There are two types: zero-sum, which is win or lose, and non-zero-sum, which we cover over the next two weeks. Zero-sum means a fixed pie: gains for one are losses for the other. HR examples include fixed budgets, headcount, or a set bonus pool. Related media: Barbados versus Grenada and the Mexican standoff, classic win-lose games.
What a payoff matrix looks like. Management is the row player, choosing hard or soft tactics; the union is the column player, choosing hard or soft tactics. Each side picks at the same time, blind to the other's choice. Each cell shows management's share of revenues: hard versus hard is 55 percent; hard versus soft is 70 percent; soft versus hard is 40 percent; soft versus soft is 50 percent. It is zero-sum, so the union gets the rest.
Solving it: find the dominant strategy. Using the same matrix, hard tactics win management a bigger share whatever the union does: 55 percent versus 40, and 70 percent versus 50. Hard tactics are therefore a dominant strategy, so management will always choose them. The equilibrium is hard versus hard, at 55 percent.
Where we land, and what's next. Sequential games: look forward and reason back, anticipating the other side before you move. Zero-sum games: when the pie is fixed, find your dominant strategy. But most HR problems are not truly zero-sum, and framing them that way hides possible mutual gains. Next week: non-zero-sum games, the prisoner's dilemma, where fragile cooperation can pay.