Leveraging Game Theory for Effective Leadership

The Mammoth in the Room

Are you aware of the game theory models in your organization? Team members constantly evaluate each other’s reputations and perceptions of fairness. Consequently, understanding and managing group behavior dynamics is critical for effective leadership.

In this episode, we will explore the application of game theory models in corporate leadership. Using the ultimatum, dictator, and sanction game models, we’ll discuss how self-interest and group dynamics interplay in corporate settings.

Through real-life examples and theoretical models, you’ll learn how to balance fairness, cooperation, and power to build stronger teams.

If you are a corporate leader or aspiring to be one, join the conversation to learn how to leverage evolutionary and biological truths about human behavior to create a thriving work environment.

In this episode:

- Personal anecdote: the tough manager dilemma

- Understanding human behavior through game theory

- The ultimatum game

- The dictator game: power dynamics

- The sanction game: enforcing fairness

- Applying game theory in the corporate world

- Key takeaways on human behavior and leadership implications

Citations for this episode:

Fehr, E. & Schmidt, K.M. (2000). Theories of Fairness and Reciprocity - Evidence and Economic Applications (December 23, 2000). Available at SSRN: https://ssrn.com/abstract=255223; or http://dx.doi.org/10.2139/ssrn.255223; https://www.investopedia.com/terms/g/gametheory.asp

Kumar, R. (2024): An Introduction to Game Theory. Irish Interdisciplinary Journal of Science & Research (IIJSR), Volume 8, Issue 1, Pages 01-07, January-March 2024; https://press.princeton.edu/books/paperback/9780691130613/theory-of-games-and-economic-behavior; https://www.nobelprize.org/prizes/economic-sciences/1994/nash/facts/

Nash, J.F., 1950. The bargaining problem. Econometrica, 18(2), pp.155-162; Kreps, D.M. (1989). Nash Equilibrium. In: Eatwell, J., Milgate, M., Newman, P. (eds) Game Theory. The New Palgrave. Palgrave Macmillan, London. https://doi.org/10.1007/978-1-349-20181-5_19

Inagaki, T. & Eisenberger, N. (2016). The Neurobiology of Giving Versus Receiving Support: The Role of Stress-Related and Social Reward-Related Neural Activity. Psychosomatic Medicine: Journal of Biobehavioral Medicine; Fehr, E., Fischbacher, U. & Gächter, S. (2002). Strong reciprocity, human cooperation, and the enforcement of social norms. Hum Nat 13, 1–25 (2002). https://doi.org/10.1007/s12110-002-1012-7

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