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‘GAME THEORY’: Another Technique

 

to Supplement Pre-Project Risk Assessment

or Post-Project Evaluation

 

ADVISORY ARTICLE

By Dr. Kenneth Smith, PMP

Honolulu, Hawaii

& Manila, The Philippines


INTRODUCTION

Russia’s recent invasion of Ukraine in February 2022 sparked a renewed interest in Game Theory.  Developed by John von Neumann,[1] and Oskar Morgenstern[2] in the 1940s, Game Theory is a technique for analyzing a situation whereby stakeholders interactively compete, and seek a dominant strategy; i.e. a course of action or actions that — of all the possible strategies which could be used — would ultimately result in their best outcome, regardless of the opponent’s tactics.  War gaming, of course, is quite complex as it considers a series of moves and reactionary counter-moves, as well as feints to confuse the opponent in order to advance to one’s objective.  Various options are then scripted and practiced under actual or simulated conditions to test their effectiveness, validity, and ways to correct or refine their approach.

John Nash[3] subsequently extended von Neumann & Morgenstern’s work, adding the ‘Nash equilibrium concept – a sub-optimalsaddle-point[4] in an analytical ‘zero-sum matrix[5] situation where all benefit somewhat considering the rational options of other stakeholders — if they then agree to cooperate and satisfice.[6] 

However, unabated behavior by self-interested stakeholders is inadvertently self-destructive, as it will inevitably create and perpetuate a vicious cycle detrimental to all.  “The Tragedy of the Commons” essay in 1968 by ecologist Garrett Hardin[7] is a classic example of Game Theory analysis leading to an undesirable Outcome.  Hardin observed and analyzed population growth trends, then concluded that contemporary behavior of humans – independently, but unrestrainedly competing for limited resources — would ultimately stress earth’s ecosystems beyond capacity, resulting in catastrophe for humanity. A dismal prospect indeed! 

Unfortunately, not all stakeholders act rationallyat least in the ‘Western’ concept of rationality — &/or abide by ‘Agreements’! Some march to the beat of a different drummer, and — fixating on their own objectives — are implacable. Rather than cooperating, compromising and satisficing, rationality from their perspective is to persevere with their dominant strategy, despite the consequences![8]

Nevertheless, despite these limitations, Project Management planners and evaluators can also apply the Game Theory technique to help identify the root cause(s) of specific sector situations in need of improvement.  Armed with potential behavioral insights of other stakeholders, Game Theory interaction analysis can help conceive project interventions to mitigate undesirable effects, &/or avert on-going, or potential, vicious cycles, to result in a more favorable sub-optimal, optimum or dominant outcome.

Although I had previously been a participant in several military war gaming exercises, my initial exposure to understanding Game Theory was in 1969, as a systematic policy-analysis Fellow of MIT’s Center for Advanced Engineering Study (CAES).  However, a couple of years later — as an external evaluation team leader for an international development donor organization (IDO) — I had an opportunity to apply Game Theory to evaluate an on-going project under consideration for extension.  The remainder of this article describes how that situation was analyzed, and some lessons learned therefrom, as an illustrative guide for others.

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How to cite this article: Smith, K. F. (2022). ‘GAME THEORY’: Another Technique to Supplement Pre-Project Risk Assessment or Post-Project Evaluation, PM World Journal, Vol. XI, Issue IV, April. Available online at https://pmworldlibrary.net/wp-content/uploads/2022/04/pmwj116-Apr2022-Smith-game-theory-advisory-article.pdf


About the Author


Dr. Kenneth Smith

Honolulu, Hawaii
& Manila, The Philippines

 

Initially a US Civil Service Management Intern, then a management analyst & systems specialist with the US Defense Department, Ken subsequently had a career as a senior foreign service officer — management & evaluation specialist, project manager, and in-house facilitator/trainer — with the US Agency for International Development (USAID).  Ken assisted host country governments in many countries to plan, monitor and evaluate projects in various technical sectors; working ‘hands-on’ with their officers as well as other USAID personnel, contractors and NGOs.  Intermittently, he was also a team leader &/or team member to conduct project, program & and country-level portfolio analyses and evaluations.

Concurrently, Ken had an active dual career as Air Force ready-reservist in Asia (Japan, Korea, Vietnam, Thailand, Indonesia, Philippines) as well as the Washington D.C. area; was Chairman of a Congressional Services Academy Advisory Board (SAAB); and had additional duties as an Air Force Academy Liaison Officer.  He retired as a ‘bird’ colonel. After retirement from USAID, Ken was a project management consultant for ADB, the World Bank, UNDP and USAID.

He earned his DPA (Doctor of Public Administration) from the George Mason University (GMU) in Virginia, his MS from Massachusetts Institute of Technology (MIT Systems Analysis Fellow, Center for Advanced Engineering Study), and BA & MA degrees in Government & International Relations from the University of Connecticut (UCONN).  A long-time member of the Project Management Institute (PMI) and IPMA-USA, Ken is a Certified Project Management Professional (PMP®) and a member of the PMI®-Honolulu and Philippines Chapters.

Ken’s book — Project Management PRAXIS (available from Amazon) — includes many innovative project management tools & techniques; and describes a “Toolkit” of related templates available directly from him at kenfsmith@aol.com on proof of purchase of PRAXIS.

To view other works by Ken Smith, visit his author showcase in the PM World Library at https://pmworldlibrary.net/authors/dr-kenneth-smith/

[1]  John von Neumann (December 28. 1903 – February 8. 1957) a Hungarian – American mathematician and physicist, contributed to many fields: Set theory Functional analysis Quantum mechanics Ergodic theory Continuous geometry Economics Game theory Computer science Numerical analysis. (Wikipedia)

[2] Oskar Morgenstern (January 24, 1902 – July 26, 1977) was a German-American economist. In collaboration with mathematician John von Neumann, he founded the mathematical field of game theory as applied to economics (see von Neumann–Morgenstern utility theorem). (Wikipedia)

[3] John Forbes Nash Jr. (June 13, 1928 – May 23, 2015) was an American mathematician who made fundamental contributions to differential geometry, game theory, and the study of partial differential equations. Nash’s work has provided insight into the factors that govern chance and decision-making inside complex systems found in everyday life. (Wikipedia)

[4] The best option for all participants.

[5] Zero-sum is a situation in game theory in which one person’s gain is equivalent to another’s loss, so the net change in wealth or benefit is zero. (www.investopedia.com/terms/z/zero-sumgame.asp).

[6] An acceptable, but less-than optimum Outcome.

[7] Garrett James Hardin (April 21, 1915 – September 14, 2003) was an American ecologist who warned of the dangers of human overpopulation. (Wikipedia)

[8] Bottom line:  You can’t negotiate in good faith with — and trust — some people! They won’t abide by agreements.

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