Framework library
Game theory and payoff matrices
How to use it
Specify players, feasible actions and payoffs under each combination. Find each player's best response, then test what changes under repeated play or uncertainty.
Worked example
Model a software price rise with and without a rival discount. Estimate retention under each response before assuming competitors will hold prices.
Common pitfall
Numeric payoffs can conceal weak behavioural assumptions. Test the likely response, not only the arithmetic.
- Frame the questionWho can change the terms on which this business earns a margin?
- What to deliverIdentify the mechanism, who benefits from it and the strongest substitute or competitor response.