July 2023

Lessons from game theory: How collaboration and communication affect payoffs

by Daniel Rocha

Back to insights

Lessons from game theory: How collaboration and communication affect payoffs

July 2023 by Daniel Rocha

Back to insights


Game theory is a compelling strategic model that makes sense of the pivotal role that communication, trust, and alignment play in achieving optimal negotiation results. In this article, we deep dive into some famous game theory examples, and explore how the learnings can be successfully applied to negotiation for optimised outcomes.

Game theory is the study of interactive decision-making, in which the outcome for each "player" is dependent on the actions of all. And, as a player in such a game, what’s imperative is that you consider and take into account what the choices of others may be when choosing your own course of action or strategy. For any skilled negotiator, these kinds of concepts - that of considering the choices and motivations of others when choosing how to behave, what proposals to offer, and how to respond to counter proposals - should be very familiar.

For those for whom game theory is not well understood, the most famous scenario that’s used to illustrate it is known as the prisoner’s dilemma, in which two prisoners are accused of a crime. If one confesses and the other does not, the one who confesses will be released immediately and the other will spend 20 years in prison. If neither confesses, each will be held only a few months. If both confess, they will each be jailed 15 years.

The dilemma therefore is that it is better for both to cooperate rather than for neither to do so, yet it’s best for each not to cooperate, regardless of what the others do.

Now we have established a baseline understanding of the intricacies of game theory, this article will examine other scenarios - from a couple deciding on a movie to watch, to cavemen hunting for survival - to highlight concepts of individual and collective objectives.

We'll unpack how different strategies can lead to varying outcomes, and the crucial role communication plays in achieving optimal results. We will also discover how clear, transparent communication can maximize results and foster successful collaboration.

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Daniel Rocha