BY CARLOS FUENTES
“Winning or Losing the Game?” (Contingencies, July/August
2016) introduced certain basic ideas of game theory to analyze
the economics of integrated health care systems. That article, like
this one, stresses the fact that interactions arise in a wide array
of contexts and that fundamental strategic principles must be
commensurately broad. The analytical power of such principles
is linked to our ability to adapt them to the situation at hand and
employ them as reasoning tools.
Game theory can be used to develop mathematical models,
as in “Winning or Losing the Game?” But it can also be deployed
to create conceptual frameworks—the “soft” approach—for
analysis. Conceptual frameworks are the hallmark of strategists,
most of whom never had any formal training in game theory
but nonetheless have fostered the ability to use them effectively
because such frameworks are rooted in common sense and a deep
understanding of human nature.
The purpose of this article is to apply the “soft” approach
of game theory to analyze the strategic interactions of those
who participate in the U.S. health care system, understand
the fundamental elements of the system (cost, access, quality,
efficiency), and draw conclusions about plausible mid- and
A Quick Review of Basic Concepts
A great many men have imagined states
and princedoms such as nobody ever saw
or knew in the real world, for there’s such
a di;erence between the way we really
live and the way we ought to live that the
man who neglects the real to study the
ideal will learn how to accomplish his
ruin, not his salvation.
—“The Prince,” Machiavelli
The Game and The Players
A fundamental requirement to act strategically is to understand
the rules of the game—the real game, not the imagined one—and
gather information about the players. If the opportunity arises,
strategists can modify the game in their favor by defining some of
its rules, changing the payoffs through the shaping of perceptions,
and even driving out strong opponents.
Players are individuals or groups (e.g., firms) capable of making
decisions and influencing outcomes. Although followers—say, soldiers
or employees—have a role, leaders are the key participants. Indeed,
this trivial observation is often overlooked. In the business space,
corporations are often seen as homogenous entities whose decisions
reflect the will of management, staff, and shareholders. A moment
Men are ambitious,
vindictive, and rapacious.
—Federalist Paper No. 6, Alexander Hamilton
A Rigged Game?