Games of strategy, with everyday Indian examples

What makes a game strategic. A game of strategy is any situation in which two or more decision makers are interdependent: what each one gets depends not only on her own choice but also on the choices of the others, so before acting each must think about how the others will respond. The study of such interactions among two or more participants is called game theory. Two contrasts make the idea sharp:

• Against an individual decision. In perfect competition a firm is assumed to ignore its rivals, since their actions do not affect it; in an oligopoly, where a few large firms dominate, each firm must allow for the reaction of its competitors before it decides.
• Against a game of chance. Most games mix skill, chance and strategy. Tossing a coin is pure chance: no player's thinking about the other changes the result. A game becomes strategic when you try to work out what the other side is thinking, knowing that the other side is doing the same about you.

How a game of strategy is described. Every such game has participants who choose a course of action (the players), the plans of action open to each (strategies), and the gain or loss each receives once the chosen strategies are played out (payoffs), which may be money or something non-monetary such as satisfaction. Players are assumed to be rational, choosing so as to maximise their payoffs while expecting their rivals to do the same. Games differ in timing (moving one after the other, or at the same time), in whether one side's gain is the other's loss, in whether they are played once or repeatedly, and in whether all players are equally informed.

Examples of games of strategy. All of the following are our own.

1. Two mobile networks deciding whether to raise prepaid tariffs. If one raises its price and the other does not, the first loses subscribers; if both raise, both may earn more. Each company's best move depends on what it expects the other to do, and both decide without seeing the other's choice, so it is a simultaneous game. It is not one of pure conflict: both can gain or both can lose together.
2. Bargaining over an auto-rickshaw fare at a railway station. The driver quotes a fare first; the passenger, having heard it, accepts, counters or walks to the next auto. Because one moves after seeing the other's move, this is a sequential game, in which the later mover chooses with the benefit of knowing the first move.
3. A super over in a T20 match. The bowler chooses between a yorker and a slower ball; the batter tries to guess which is coming and sets up for it. Every run one side gains is a run the other concedes, and only one team can win, so it is a game of total conflict, close to zero-sum.
4. A neighbourhood kirana store giving goods on credit (udhaar). The shopkeeper and a regular customer meet every week. A customer who fails to repay once loses credit for the future, so both have a reason to keep their word. Because the game is played again and again with the same players, reputation and cooperation shape the outcome.
5. Selling a used scooter online. The seller knows whether the engine has been giving trouble; the buyer does not. With such unequal information, the better-informed player has a reason to conceal or misstate what she knows, and the buyer must decide how far to trust the description.

Beyond these, game theory is used to study firms' rivalry, voting, negotiations and collective bargaining, and even decisions in war.

Conclusion. A game of strategy is an interaction in which each player's payoff depends on everyone's choices, so each must anticipate the others' moves. Tariff setting by rival networks, fare bargaining, a super over, shop credit and a used-vehicle sale all have this feature, though they differ in timing, in how far interests conflict, in repetition and in information.