The Art of Strategy: A Game Theorist's Guide to Success in Business and Life

by Avinash K. Dixit

“I am hard pressed to think of another book that can match the combination of practical insights and reading enjoyment.”—Steven Levitt

Game theory means rigorous strategic thinking. It’s the art of anticipating your opponent’s next moves, knowing full well that your rival is trying to do the same thing to you. Though parts of game theory involve simple common sense, much is counterintuitive, and it can only be mastered by developing a new way of seeing the world. Using a diverse array of rich case studies—from pop culture, TV, movies, sports, politics, and history—the authors show how nearly every business and personal interaction has a game-theory component to it. Mastering game theory will make you more successful in business and life, and this lively book is the key to that mastery.

Genres: Business, Nonfiction, Economics, Psychology, Management, Self Help, Science

512 pages, Audiobook

First published January 1, 1991

About the author

Avinash Kamalakar Dixit (born August 6, 1944 in Bombay, India) is an Indian-American economist. He is currently John J. F. Sherrerd '52 University Professor of Economics Emeritus at Princeton University, Distinguished Adjunct Professor of Economics at Lingnan University (Hong Kong) and Senior Research Fellow at Nuffield College, Oxford.

Dixit received a B.Sc. from Bombay University in 1963 in Mathematics and Physics, a B.A. from Cambridge University in 1965 in Mathematics (Corpus Christi College, First Class), and a Ph.D. in 1968 from the Massachusetts Institute of Technology in Economics.

Dixit has been the John J. F. Sherrerd '52 University Professor of Economics at Princeton University since July 1989. He is also Distinguished Adjunct Professor of Economics at Lingnan University (Hong Kong) and Senior Research Fellow at Nuffield College, Oxford. He previously taught at Massachusetts Institute of Technology, at the University of California, Berkeley, at Balliol College, Oxford and at the University of Warwick. In 1994 Dixit received the first-ever CES Fellow Award from the Center for Economic Studies at the University of Munich.

Dixit has also held visiting scholar positions at the International Monetary Fund and the Russell Sage Foundation. He was President of the Econometric Society in 2001, and was Vice-President (2002) and President (2008) of the American Economic Association. He was elected to the American Academy of Arts and Sciences in 1992 and the National Academy of Sciences in 2005.

With Robert Pindyck he is author of “Investment Under Uncertainty” (Princeton University Press, 1994; ISBN 0691034109), the first text-book exclusively about the real options approach to investments, and described as “a born-classic” in view of its importance to the theory.

(from Wikipedia)

Reviews

[David Rubenstein · Rating 5 out of 5]

This book is an engaging, comprehensive guide to strategies, as applied to everyday life. The first part of the book focuses on standard game theory, graphical notations for various problems, and applications of the prisoners' dilemma to everyday situations. The second part of the book concentrates more on everyday and business problems, and strategies to achieve optimal solutions. Game theory is not always applicable to all of these problems, but logic and rational problem-solving and a bit of mathematics are ever-present.

The book explores the voting issue in some detail. When two candidates are running against each other, the best strategy of course is to vote for your first choice. When three or more candidates are running, it is not always best to vote for your first choice, especially if you believe that your first choice has no chance of winning. For example, in the presidential election of 2000, there were three candidates, Bush, Gore, and Nader. If you preferred Nader to the others, you could vote for him, but your vote would be pretty much wasted, as he had little chance of winning. It would be best to vote for your second choice. But, what if the election was predicted to be much closer; what would the best strategy be then?

Furthermore, the book explores other voting systems that would allow you to list all of your voting preferences? For example, what if you could vote on all of the candidates, listing their names in preferential order. Various vote-tallying systems could take these preferences into account, and come up with a fairer assessment of the most-preferred candidate.

But here's the rub; there are numerous vote-tallying systems, each of them objective, but depending on which one is chosen, a different candidate could win. The book goes into some detail in considering the different outcomes of the 2002 presidential race, considering several of these systems.

The book also describes three different systems for auctions. Although the systems differ dramatically, the optimum strategy is the same for all of the systems.

The book describes various approaches for political negotiations. Examples include incentives and threats. But a threat is only good if it is credible. The book describes some historical approaches that have made threats credible. Another type of strategy is how a company can best compete with other companies, by setting prices that will maximize profitability.

The book has a set of exercises to try out your newly-gained understanding. One of the exercises is to consider how to make a good first impression on a first date. You are faced with two simultaneous problems; how to prove your sincerity and quality to your date, and how best to assess the sincerity and quality of your date. In other words, what is the best strategy for signaling and screening?

This book is best appreciated if you are not afraid of some simple algebra. However, many of the strategies are not at all mathematical, but simply rely on logic. I thoroughly enjoyed this book; some of the chapters were a bit repetitive, but not overly so.

[Kara · Rating 2 out of 5]

There is absolutely no need to read this book if you've read Thinking Strategically.

I'm not certain why they exist as two separate books. The content is almost identical, and 90% of the examples in this one were lifted from that. I have no idea why this is touted as a "sequel." It is not. It's just Thinking Strategically repackaged (but I will say that its package is prettier). The tagline says that it's a "guide to success in business and life," but it is not. It is game theory explained in an accessible way.

I love game theory. I studied economics in college, and game theory had been my favorite class. I enjoyed Thinking Strategically and looked forward to reading this one. I was disappointed. Had I not read Thinking Strategically, I probably would have found this enjoyable, but I'm giving it two stars for the false advertising.

[Billie Pritchett · Rating 3 out of 5]

Avinash Dixit's Art of Strategy is an informative book and a little boring. It's informative because it provides you with some basic principles for how to reason properly in situations where you have to coordinate or compete with other people, your self, or a company or something equally abstract; 'game theory' is just a fancy name for principled strategic interaction. And it's boring in the sense that it requires some understanding of mathematics, and if you're mathematically stupid like I am you might hate this part.

The basic principles are: (1) look forward, reason backward; (2) play your dominant strategy; (3) don't play clearly dominated strategies; (4) always look for equilibrium solutions; (5) mix your plays in zero-sum situations. Principle (1) means think about the possible results of your actions in relation to who you are interacting with and try as much as possible to play your best strategy at each move according to what would result. Principle (2) means do principle (1) but always play the strategies that are better than your opponents. Supposing there is no dominant strategy with respect to principle (2) then a la principle (3) just act in some way that you would not clearly fail with your result. Principle (4) means look for situations where you and the person with whom you are interacting would mutually benefit or end up with the same result because that's most likely what result you're going to land on if you're both being reasonable with each other. Principle (5) means in situations where your win means someone else's loss and vice versa, just mix up your strategy to try to get a good result.

Game theory is not an exact science. It's kind of an art and a science. There's no guarantee that you're going to interact well with people as a result of reading something like this book. That's because you don't always have complete information about the situation or the other people you're interacting with, don't know what situation you're in, and don't know what you really want, among other problems.

[Ricardo Marcos · Rating 2 out of 5]

Lots of examples that make us lose focus on what is really important from Game Theory. Lack of proper definitions. Took me 11 pages of anotations to resume the whole book. I couldn't say if this book can really guide me to success in business and life. My opinion is:
- Too redundant with descriptions;
- Lack of proper definition;
- Confusing descriptions of theories
- Confusing examples and tables;
- Not clear about aspects of theories.
I would not recommend this book to a beginner learning Game Theories.

[Ernest · Rating 4 out of 5]

The Art of Strategy is a brilliant book about game theory written for a popular, general audience. Game theory is the study of strategic decision making and behaviour, and while it is a whole discipline of study in itself, this book written by academics in the field is not a textbook but a written for a general audience that while being accessible to a non-specialists, still manages to be a rigorous introduction into the subject, all the while being fun and engaging through the examples used and discussed. From solving problems by backwards reasoning, to making strategies credible, to analysing how best to cooperate and coordinate, each chapter of this book was fascinating to read in its discussion of a game theory topic and applications to very understandable examples.

It would be a disservice to the book to try summarising its points or discussions engaged in. The concepts here are presented in a way that an average reader will be able to follow the majority of the material, although I will admit to a few moments where I failed to understand. The real-life examples used enhances the book’s readability and kept me engaged throughout. Students of economics may have already covered some of this material but only the most engaged academics or constant practitioners of strategic thinking will find nothing of worth and value in this book.

Such is the power of the book that it is hard for me not to see many situations all around through the lens of game theory. I may not know how to fully strategically think through a situation, but I now see conflicts and decisions in a different light, from the mundane like organising where to go for lunch to the serious like the Israel/Palestine conflict. I now have a different framework to making decisions, one that will (hopefully) improve and enhance my life.

I recommend this book to everyone. At the very least, readers will learn interesting things and be fascinated about how things can be reasoned out. Even better, it may change for the better the way you view situations and how you make decisions.

[Tatevik (KiVeTaTKa) · Rating 4 out of 5]

Հետաքրքիր էր, շատ լավ օրինակներ և վերլուծություններ կան գրքում։ Ստրատեգիկ մտածողության զարգացմանն ուղղված հիանալի ձեռնարկ կարելի է համարել։ Մասնավորապես խորհուրդ եմ տալիս կարդալ մենեջերներին։

[Atila Iamarino · Rating 3 out of 5]

Legal de ler. Os autores têm mais um livro sobre o tema, escolhi o mais recente e foi uma boa. Este é o mais atualizado e discute mais ou menos o mesmo conteúdo do Thinking Strategically: The Competitive Edge in Business, Politics, and Everyday Life. Eles tratam de várias situações de disputa ou conflitos entre interesses e grupos e como resolvê-los de forma estratégica. É uma introdução legal sobre teoria dos jogos com exemplos interessantes e um resumo/explicação ao fim de cada exemplo.

Gostei bastante da explicação sobre como duas lojas podem combinar o preço mais alto sem conversarem, se uma delas cobrir o preço da concorrência. Assim a concorrência sabe que a melhor decisão é manter o preço mais alto e não dar desconto (pois é). Vai para o Nerdologia com certeza. O The Dictator's Handbook: Why Bad Behavior is Almost Always Good Politics foi mais legal de ler, ainda mais por exemplos mais diretos e com consequências.

[Dan · Rating 4 out of 5]

I wish I had read this book with a pen and paper, and less on the PATH train. Unfortunately, I think I failed to digest some of the more quantitative aspects of game theory.

All things considered, though, this was an excellent book and review of game theory. And because payoffs are so difficult to determine, anyway, you don't really need the math as much as the thought processes and logic of strategic thinking (essentially, don't make decisions without figuring out what the other actors' interests are). For that, this is a very good read.

[J. Joseph · Rating 2 out of 5]

Game theory is all about anticipating another’s moves so you can maximize your own outcomes. Much of this field, however, is counterintuitive. In The Art of Strategy, Dixit and Nalebuff work the reader through introductory and intermediate game theory principles. As they do, they provide several rules to follow in order to maximize your strategic thinking and capabilities, including: look forward but reason backward (aka: figure out what you want and then work back from there to where you are) and always look for an equilibrium (in game theory, that's called a Nash Equilibrium). Dixit and Nalebuff apply these principles and rules consistently throughout the book to real work applications in business, television, movies, sports, politics, and history, all in an effort to show the reader that game theory is everywhere.

This one is rough for me to review, because I love game theory and really wanted this to be good. If you’ll tolerate me for a moment, let me pitch game theory to you: it’s a science of understanding interpersonal or multi-player decision-making. These are called “games”, and they can indeed relate to real games we play as humans (e.g., rock paper scissors, chess, etc.) as well as business of life situations. The goal is to maximize the outcome for you and the opponent, and that’s done by strategically predicting the opponents moves.

Overall the book is a fine introduction to game theory and covers many of the different "games" and strategies quite well. The epilogues to each section of the book were also super clear and useful in terms of both summarizing and applying that section to what comes in the next section. The main problem, however, is that this book unfortunately misses the mark in terms of its own stated goals. In the preface the authors explain this is meant for a public audience, however I found that the book is more accurately described as written for a first- or second-year undergraduate level. In a similar vein, the book had a lot of math that isn't appropriately geared toward the public - for example, the average person on the street isn't going to know what δ means in an equation. The structure of the book also makes it difficult to maintain attention — for example, the intro chapter is 30 pages of examples of games, without much discussion, and all done before the reader knows anything about game theory.

[Denis Romanovsky · Rating 5 out of 5]

This book let me understand how stupid I’m and how much again there is to learn and practice. Instead of another book on leadership, management framework or business analysis better take something to read about game theory. Game theory appears to be a part of systems thinking science, a true part. If you want to understand systems better, you have to read on games theory. As for the book - it is easy to read, not much math, good examples. Highly recommended!

[Richard · Rating 5 out of 5]

Listening to this Audiobook was the reason I received the Dean's Award for Managerial Economics in my MBA Class at MBS 2023.
This was the dominant strategy.
5/5

[Jake Strong · Rating 3 out of 5]

Admittedly sometimes when this started to delve into equations and business jargon my brain went elsewhere, but I wanted more real life examples than mostly high leverage business situations that I will never find myself in.

[Krishna Singh · Rating 5 out of 5]

This is one of those which you keep near you and re-read/refer time to time. I’d keep this next to Danny’s ‘Think fast ..’.

[William Schram · Rating 4 out of 5]

Game Theory is a mathematical field that deals with making decisions when the choices your opponent makes actually matter. It has applications in many different fields of study. The most famous problem from Game Theory is probably the Prisoner’s Dilemma, with information being distributed unevenly among the participants. It works out the optimal strategy for this situation, which might actually be counter-intuitive. This is merely my limited understanding of the field, but it makes for a good segue into the actual review.

A long time ago, back in 1991, the authors wrote a book named Thinking Strategically. They intended to revise it, but they decided to rewrite it instead and release it under a new title. This copy was released in 2008. The reason for this rewrite is explained in the Preface. Their perspective on events has changed in 17 years, so they rewrote the book to include values and ideas that align with these changes.

The book doesn’t contain the heavy-duty mathematics behind the reasoning of each decision. This makes it more accessible to the average audience that might not be familiar with higher mathematics. The book does contain a number of real-world examples and relatable situations. While some of the examples are quite simple, they fully examine them and lead them on through their reasoning. One such example is from the Peanuts Comic strip; Lucy holds out the football for Charlie Brown to kick. This is American Football for those who might be from other countries. Poor naive Charlie Brown attempts to kick the ball, but Lucy pulls the ball away at the last second and Charlie Brown falls on his behind. Cue the Schadenfreude than results from this situation. The authors examine this situation and more. Another Pop Culture reference is from The Princess Bride. We all remember the scene where Westley battles Vizzini in a war of wits.

While we go through all of this, a number of concepts arise in the text. The Nash Equilibrium, the Dominant Strategy, and a number of other things are all discussed. Along the way, the authors describe rules to follow in cases where decisions must be made. The book is really enjoyable and interesting.

[Dann · Rating 4 out of 5]

Dixit and Nalebuff provide an exceptionally good introduction to game theory without making it overly difficult. There are real-world examples, ways to practice your game-theoretic thinking, and a lot of really useful information that might actually help you in your real life. That's what I really loved about this book—after reading it, I saw that the principles could be applied anywhere (especially in Craigslist selling, which I was doing a lot of—how cool is that?).

I read this book for a class, but before it, I tried reading Game Theory Evolving: A Problem-Centered Introduction to Modeling Strategic Interaction, by Herbert Gintis. Couldn't do it. If you need a textbook for a game theory class, Gintis's might be the way to go. If you just want to find out more about the theory and how it's applied to really common situations, read it. It's really interesting!

I'd recommend this to anyone, regardless of whether it's assigned or related to a class or not. It really does have a lot of real-world applications, and it's written very well.

[Matthias · Rating 4 out of 5]

The authors re-published under a new name their 1991 classic Thinking Strategically: The Competitive Edge in Business, Politics, and Everyday Life, with a minimal amount of tweaks and updates taken from the recent developments in the field of behavioral game theory.

The book is more than just an introduction to Game Theory - it goes beyond its goal by analyzing in detail a series of specific examples. The overall contexts and situations in those examples are often kind of trivial, and even kind of artificial in the same way though experiments are, so the resulting in-depth analyses can be quite tedious. Contrary to what its sub-title suggests, there's not much information to absorb that could be immediately applicable in real-life situations; it feels instead like going through a series of mental exercises/puzzles ("workouts", as the authors say) just to keep your brain in shape. Interesting stuff for the curious reader, but limited applications.

[Mark Massey · Rating 2 out of 5]

Tbh, the book did a great job during the case studies on explaining how to think through backwards reasoning, reverse induction type scenarios, and (very) basic game theory principles. Provided some fresh perspectives and applications of prisoner’s dilemma scenarios, playing ur dominant strategy, & finding the Nash equilibrium in situations. I found it a little dry at times when it would oversimplify scenarios, make large generalizations about complex situations (like with the presidential elections), and get too far into the math. Also, didn’t really help with the business or life aspect. Just scenarios, brain teasers, and puzzles. Overall, great reminder on how to play games through life where soemone should consider other people’s interests, reasoning, & strategies.

[Simon Eskildsen · Rating 4 out of 5]

If you've looked for a foray into Game Theory, this is it. It walks through a bunch of important ideas in Game Theory, from auctions to equilibrium in games. This book is filled with models that you can apply in many contexts, introduced through approachable examples—although, some chapters are easier to get through than others. Working my way through my highlights in the book is already proving rewarding, but it's definitely dense in information (but not in language). Don't read this as a before-sleep-pass-out-book. This is a wide-awake-and-ready-to-stop-and-think book. A good one at that.

[Nataliia Osadcha · Rating 4 out of 5]

Наука та мистецтво відрізняються способами пізнання: науку вивчають за допомогою системного і логічного підходу, майстерність у мистецтві здобувають на прикладах, досвіді і практиці.
❓️Як можна застосовувати логіку та науку в світі, де люди поводяться ірраціонально
❔️Чи завжди вигідно підрізати ціни конкурентам
❓️Чому нам потрібен суперник і грати проти себе в шахи, в ґо так складно
❔️Або як вийти із проблемної ситуації і подивитися на неї з іншої точки зору
❓️Чому нам так хочеться карати шахраїв, але при цьому ми самі частенько порушуємо ці ж правила

Виявляється в божевіллі цього світу є певна система.

Робота і життя в суспільстві - це постійний потік рішень.
Теорія гри - це галузь соціології, що вивчає прийняття стратегічних рішень📈

Що саме перетворює якусь конкретну ситуацію на гру?:.. ви повинні враховувати цілі та стратегії решти гравців.
Важлива непередбачуваність.

Не робіть іншим так, як хочете, щоб робили вам - адже у них можуть бути зовсім інші смаки..😏

Ми не живемо і не функціонуємо у вакуумі.

В іграх з послідовними ходами, кожен гравець мислить лінійно і повинен передбачити майбутні ходи інших і використати це для своїх теперішніх ходів.
У грі з одночасними ходами існує логічне коло міркування: я думаю, що він думає, що я думаю...
Шукайте домінантну стратегію або де дія кожного гравця є найкращою відповіддю на дію іншого.

‼️Думайте наперед і логічно міркуйте в зворотному напрямку.

Справедливість і альтруїзм мають свої межі. У тривалій перспективі прогрес суспільства потребує інновацій та змін. А вони неможливі без індивідуалізму та готовності порушити соціальні норми.
Між егоїстичною і альтруїстичною по��едінкою потрібен розумний баланс.

Завжди існує більша гра..

І якщо ви досі думаєте, що стратегія це щось про війну, бізнес чи маркетинг.. то не полінуйтесь погортати цю книгу. У житті кожного з нас безліч методів і тактик в прийнятті рішень, та набагато ефективніше усвідомлювати це і створювати власну довготривалу стратегію.

Місцями книга досить складна і потребує додаткових знань, глибокої концентрації і бажання зрозуміти написане.

[Dmitry · Rating 4 out of 5]

Книга вызвала неоднозначную реакцию. Первая часть представляет собой по сути, учебник. Описываются основные концепции теории, базовые математические расчеты, диллемы и тому подобное.
Вторая часть, основная, содержит описание различных ситуаций и примеров применения теории игр в реальной жизни. Примерами служат аукционы, ограничение скорости движения на дорогах, выборы, мотивация программистов и так далее. Примеры детально разбираются, приводятся расчеты и обоснования.
Все это выглядит очень интересным и познавательным. Но только в действительности далеко не все так просто. С моей точки зрения спорными выглядят примеры мотивации сотрудников, когда та же работа программиста сводится исключительно к финансовой составляющей. Хотя есть ряд мнений, что исключительно деньгами мотивировать работников интеллектуального труда - не самый лучший выбор.
Итого, я узнал много нового о самой теории игр, но вот как все-таки ее применять в реальной жизни - пока вопрос открытый.

[Illia Petryk · Rating 4 out of 5]

Гарна книжка, багата на приклади і дійсно відповідає своїй назві. Правда не всі приклади дійсно мають цінність і часом автори стрибають туди-сюди без побудови висновків. 4/5, точно буду дещо перечитувати.

В мене видання 2020 року і в ньому український переклад потребує вдосконалення - відчувається, що в деяких реченнях нема логіки не через авторів а через проблеми перекладу; багато одруківок чи змістовних помилок. Але читанню не сильно заважає, а враховуючи об'єм книжки то можна пробачити.

[Wang Jiao · Rating 3 out of 5]

It explain the basic ways of thinking in game theory, look forward, reason backward. It provided some simple mathematical modelling and calculations of some theories. But I am not that impressed, the maths is simple and intuitive, not deep enough.

[Ali Hassan · Rating 4 out of 5]

This book is about strategic behavior. All of us are strategists, whether we like it or not. It is better to be a good strategist than a bad one, and this book aims to help you improve your skills at discovering and using effective strategies.

[Marius CEO · Rating 2 out of 5]

There are good examples in the book - however, the presentations lacks soul or style.

Dont expect rocket science - the insights are not spectacular and the concepts are somewhat interesting, yet there is not much new to read here.

The book is fairly bland. It gets really repetitive halfway.

[Justyna]

Dnf calym sercem.
Nie lubie gier i nie wiem czego sie spodziewalam dodajac te ksiazke do czytania.
Przekartkowam rozdzial o karierze i systemach motywacyjnych i nie byl najgorszy, no ale nie rezonuje na ten moment.

[Jesse Parvess · Rating 3 out of 5]

Very interesting - good over view of game theory. But it was a drag to get through.

[Sam Cooper · Rating 3 out of 5]

Some interesting insights but reads a bit too much like a textbook

[Christopher Fleetwood · Rating 3 out of 5]

Good introduction to game theory, but not as succinct and incisive as it could be.

I will say the idea that high interest rates increase the attractiveness of defection is something I had never considered, and is quite delightful.

[Jenny Tang]

I'm learning how to dnf books more and this is my first attempt

[Luka Miskic · Rating 3 out of 5]

Good, but way to complex for listening on Audible.