No MBA graduates without knowing about game theory (if you want to brush up on your game theory, check out the Wikipedia entry). One of the first things you’re taught is about the Prisoner’s dilemma, which according to the same fabulous Wikipedia is a
"type of non-zero-sum game in which two players can "cooperate" with or "defect" (i.e. betray) the other player. In this game, as in all game theory, the only concern of each individual player ("prisoner") is maximizing his/her own payoff, without any concern for the other player’s payoff per se." However, if you participate, you maximise both your own and the other person’s pay-off.
Where is this going? Apart from being an interesting theory to think about in a theoretical way, it doesn’t come into its own until you work with it. And today, in Negotiations class, we did an exercise which dealt with a typical Prisoner’s Dilemma. We were split in groups, and had to go through different rounds of negotiations (so it became an iterative P-dilemma), without talking to the other party or even being in the same room with them. There are different outcomes per round depending on how much you offer in the negotiation which also depends on what the other party offers (in amount of $ you can make), and the idea is that if you cooperate, both parties end up with the highest amount of money at the end of all the rounds, higher than they make without cooperating. This is MBA101, we all get taught this in the first few months. However, of the 4 groups we were the only group that got it (and luckily for us, the other party we were negotiationg with, got it too)! Now, I don’t mean to beat my own drum (although this is MY blog ;-), but what I didn’t understand is why if people know this, and recognize the assignment as being a Prisoner’s Dilemma assignment (and I checked, they did), they would still get involved in sub-optimal solutions.
What I find most interesting is why this happens when we all know the theory. Because we’re all type A personalities as MBA students (or are we?)? Or do people’s egos get in the way (although you would think that winning the game would be more important than winning one specific round)? And why does that happen? Some of the other groups were trying to screw the other group they were negotiating with, and trying to outsmart them. Why is that? I don’t have the answers, although my guess is that ego and competitiveness might have something to do with it. Once more proves that Organisational Behaviour is one of the most important subjects to study in b-school, you can be taught other things, but if you can’t apply them in real world situations with real world people, they aren’t worth a lot. Soft skills rule!
[edit: In the interest of full disclosure, I should mention that about 70% of the people in this class have stated their concentration is in Finance, and that they want to work in Finance. Doesn’t know if that makes a difference.]