Glamor Economics

Chapter 80

Chapter 11 Section 7 How to Make Threats Work - Threats and Credibility

In game theory, there is a threat strategy, which is a response rule that punishes those who do not cooperate.If you want to influence the opponent's actions through threats, you must keep your threats no longer than necessary.Therefore, in the game, a threat of the right size should be effective and convincing enough.If the threat is big and inappropriate, the other party will not believe it, but you can't do what you say, and you won't be able to have the effect of threat in the end.

When a player in the game issues a threat, he or she may first think that the threat must be sufficient to deter or force the other party, and then consider the credibility, that is, to make the other party believe that if he refuses to obey, he will definitely suffer corresponding losses or punishments.If the other party knows the end of resistance and is afraid, he will submit obediently.However, we often do not encounter this ideal situation.

First, the very act of making a threat can be costly in itself.Second, a large and ill-conceived threat, even if implemented, can have the opposite effect.Therefore, it can be said that an effective threat requires extraordinary intelligence.Let's take a look at the soprano Ma?How Dimeple threatened those who trespassed in the garden.

Ma?Dimeple has a large private garden. There are always people picking flowers and mushrooms in her garden, and even camping and having a picnic there.Although the administrator has built fences around the garden many times and erected a wooden sign saying "Private garden, no entry", it didn't help.When Dimeple knew about this situation, he ordered the administrator to make a lot of eye-catching signs with the words "If someone is bitten by a poisonous snake in the garden, the nearest hospital is 15 kilometers away", And set them up around the garden.Since then, no one has ever trespassed on her garden.

In the example above, Ma?Dimeple cleverly used people's psychology to make the threat achieve the desired effect.Threat strategies in game theory can also be applied to business operations.

There is only one real estate developer A in a certain city, and the monopoly profit without competition is very high.Now there is another enterprise B, ready to engage in real estate development.Facing the fact that B wants to enter the industry he monopolizes, A thinks: Once B enters, his own profits will lose a lot, so it is better for B not to enter.So A said to B: If you enter, I will prevent you from entering.Assuming that A blocks when B enters, A's payoff is reduced to 2 and B's payoff is -1.And if A does not obstruct, A's profit is 4, and B's profit is also 4.

Therefore, A's best outcome is "B does not enter", and B's best outcome is "Enter" and A "does not obstruct".But these two best outcomes do not constitute an equilibrium.So what was the result?A threatens B: If you enter, I will obstruct it.For B, if A really obstructs the entry, it will get a -1 benefit, and of course A will also lose at this time.At this point, B faces a question: Is A's threat credible?
B obtained through analysis: A's threat is not credible.The reason is: when B enters, the benefit of A's obstruction is 2, and the benefit of not obstructing it is 4. 4>2, rational people will not choose to do irrational things.In other words, once B enters, A's best strategy is to cooperate rather than obstruct.Therefore, through analysis, B chooses to enter, and A chooses to cooperate.

Generally speaking, threats are made before strategic choices, so when threatened by the other party, the issue of its credibility must first be considered.

If you use threats to influence the opponent's actions, you must keep your threats no longer than necessary.Therefore, in the game, a threat of the right size should be large enough to be effective, but small enough to be convincing.If the threat is large and inappropriate, the other party will not believe it, and it may endanger itself.

Liu Bowen of the Ming Dynasty once wrote a story about "Like a Tiger".There was a man in the state of Chu who was victimized by a fox.He thought of many ways to catch the fox, but he couldn't catch the fox.Later, someone gave him an idea, saying: "The tiger is the king of all beasts. Ordinary beasts will be scared to death when they see it, and they can only lie on the ground and wait for death." Inspired by this, Chu people used Weaved a tiger model with bamboo strips, covered it with a tiger skin, and placed it under the window of my house.A few days later, the fox came again. Seeing the tiger model, he collapsed to the ground in fright, so the people of Chu State caught the fox.Later, the Chu people caught a wild boar with the help of a tiger model.Just at this time, another animal shaped like a horse was found in the wild, and the Chu man immediately took a tiger model to drive it away.Some people said: "This is refutation. It can eat real tigers, so why do you bring a fake tiger model to die?" But Chu people think that all animals should be afraid of tigers.When he arrived in the wild, he heard the thunderous roar, quickly kicked over the tiger model, and then tried his best to bite the Chu man, killing him in a short while.

The man of Chu made a tiger model, which was originally only used to frighten less powerful opponents such as foxes and wild boars, but he mistakenly believed that the tiger model was invincible. Ended up in a tragic end.

[links to related words]

Sequential game refers to the game form in which the players choose strategies in sequence.Some players may take the first action, which is a typical dynamic game.Sequential games have two very common manifestations: threats and promises.This is also a common method for both sides of the game to seek a balance of interests.

(End of this chapter)