Game theory for startup decisions

Identify the key players (competitors, customers, suppliers) in your woodworking business.

Distinguish between competitive and cooperative situations in your business.

Recognize interdependent decisions where your outcome depends on others' choices.

Map out the possible actions for your woodworking business and key competitors.

Predict how existing furniture makers might respond to your business entry.

Apply 'best response' thinking to a simple competitive scenario in your market.

Distinguish between simultaneous-move and sequential-move games.

Represent a sequential decision, such as market entry, using a game tree.

Use backward induction on a game tree to find the optimal sequence of moves.

Model a simultaneous decision, such as pricing, using a payoff matrix.

Identify a Nash Equilibrium as a stable outcome where no player wishes to unilaterally change their strategy.

Use the Prisoner's Dilemma model to understand why mutually beneficial cooperation can be difficult to achieve.

Apply a game tree and backward induction to analyze your market entry decision.

Evaluate first-mover advantages and disadvantages for your woodworking business.

Determine an optimal market position (e.g., premium niche) based on competitor analysis.

Assess when to compete head-on with an incumbent versus differentiate your offerings.

Analyze the role of entry timing based on competitor preparedness and market conditions.

Distinguish between a simple action and a strategic commitment.

Explain why irreversible investments ('burning bridges') can be a strategic advantage.

Assess the credibility of a competitor's threat or promise.

Identify methods to make your business commitments credible (e.g., contracts, public announcements, investments).

Analyze the strategic value of limiting your own future options to influence others.

Analyze a CNC machine investment as a strategic commitment that influences competitor behavior.

Evaluate your product line choice (doors vs. cabinets) based on market gaps and competitive reactions.

Determine initial capacity levels by anticipating competitor actions.

Assess the strategic value of flexibility versus specialization in your product offerings and machinery.

Analyze the trade-offs of starting with a narrow versus broad product line, considering your resources.

Model a pricing decision as a simultaneous-move game to anticipate competitor responses.

Apply the Prisoner's Dilemma concept to understand why price wars are mutually destructive.

Use the Nash Equilibrium concept to identify stable pricing strategies in your market.

Determine when to compete on price versus non-price factors like quality and service.

Evaluate strategies to avoid or de-escalate a price war.

Identify your sources of bargaining power in supplier and customer negotiations.

Analyze how your and their alternatives (BATNAs) affect negotiation outcomes.

Determine credible versus non-credible threats and promises in business negotiations.

Evaluate when to make the first offer versus wait for the other party.

Recognize how relationship value affects one-time versus repeated negotiation strategies.

Recognize how the prospect of future business changes current strategic incentives.

Compare the optimal strategy for a one-time sale versus a long-term customer relationship.

Analyze how cooperation with competitors can be sustained in a repeated game.

Apply 'tit-for-tat' and other reciprocity strategies to build trust with customers and suppliers.

Evaluate reputation-building strategies for a premium brand.

Analyze the trade-off between short-term profit and long-term reputation.

Identify situations of asymmetric information (e.g., you know your quality, but customers don't).

Distinguish between a credible 'signal' and non-credible 'cheap talk'.

Analyze how actions like premium pricing and warranties can signal high quality to customers.

Apply signaling principles to your branding and marketing to justify a premium position.

Evaluate when to reveal versus conceal information about your business plans.

Interpret competitors' actions (e.g., a major capacity expansion) as potential signals about their strategy.

Evaluate sunk costs versus future opportunities when considering a business pivot.

Identify key market signals that might trigger a pivot (e.g., competitor actions, demand shifts).

Assess the strategic value of maintaining flexibility to pivot or expand later.

Apply an experimentation framework (e.g., pilot programs) to test a new product or market before committing.

Model a potential business pivot as a sequential game to anticipate competitor responses.

Use a decision framework to evaluate the optimal timing of a pivot based on market signals.

Analyze how market structure changes as competitors enter, exit, or consolidate.

Recognize aggressive competitive behaviors like predatory pricing.

Evaluate when to accommodate new competitors versus fight for market share.

Analyze the advantages of a small firm (e.g., speed, specialization) when competing with a large incumbent.

Formulate a defensible niche market strategy to avoid direct confrontation with established players.

Analyze a business decision by considering its simultaneous impact on customers, suppliers, and competitors.

Identify the critical uncertainties that most impact your strategic choices.

Construct a scenario matrix based on key uncertainties and potential competitor actions.

Analyze how uncertainty about market demand or competitor costs affects your pricing and capacity decisions.

Apply a cost-benefit framework to decide between gathering more information and acting immediately.

Develop a robust strategy that performs reasonably well across multiple possible scenarios.