Increasingly, companies are utilizing the science of Game

Increasingly, companies are utilizing the science of Game Theory to help them make high risk/high reward strategic decisions in highly competitive markets and situations.  For General Motors, will enable this organization to form part of a business to detect the moves of others as well as make the most well-rounded decisions for their own well-being.

When General Motor’s actions will have an impact on what the others do, a form of game theory can help avoid misunderstandings. Using game theory, the organization can put itself into the shoes of each competitor and ask whether they want each option to be taken (including options they do not control) and how important that option is relative to others on the list. With these assessments, it is possible to identify a natural outcome where momentum will lead the issue – as well as a risk outcome and a target outcome for GM. The information gathered is so rich that it can guide both strategy and tactics (Bierman, 2018). Because there is a tight logical connection between the recommendations and the inputs provided by participants, decisions are often changed based on the analyses.

Since the combined knowledge of the participants about the external players and their options is usually strong, the predictions of their behavior are remarkably accurate. Even when there is disagreement or uncertainty about what other players want, the analysis can identify robust strategies or narrow the areas where additional information is needed (Martin, 2014).

Two major risks that would result from GM converting an existing line to an all-electric line.

One of the major fear factors are production volume. Automakers run major risks tooling a plant for a 200,000-unit capacity, when in reality, a particular electric car may sell just 50,000 units.

References:

Bierman, H S. (2018), Game theory with economic applications, Addison-Wesley.

Martin J. (2014), An introduction to game theory, Oxford University Press,