Non-Zero Sum Game Definition
Non-zero sum game, unlike a Sunday of NFL where half the teams win and half lose (zero sum game), refers to aggregate growth (loss) where the individual gains exceed (fall short of) the individual losses. Much interaction in the human realm is non-zero, which may explain mankind’s apparent overall progress in the recent century or two. On the downside, a nuclear confrontation would likely result in no winners in such a catastrophic loss.
In the business world, the non-zero sum game concept often reflects expanding markets where individual companies may grow even while losing market share. Mutual interests may yield “win-win” partnerships and alliances in a non-zero setting. In fact, a simple, voluntary economic exchange embodies the very idea of “win-win” where both the customer and vendor gain utility after the un-coerced transaction.
In contrast with direct, “winner-take-all” battles, non-zero sum games in business and economics may positively feature mutual interests, open negotiation, cooperation or expanding markets and resources. Non-zero sum games are best identified on a case-by-case basis. It appears that most complex, real-life interactions are non-zero. Zero sum games seem too exact, symmetrical and simplistic to have dominated modern civilization that has seen so many wide-ranging, positive-sum improvements. Even the poorest in many lands today enjoy indoor plumbing and refrigeration – provisions absent from royal palaces just a few generations ago!
Non-Zero Sum Game Examples
Since uncertainties in the stock market connote gambling in the minds of some, shareholder transactions have often been viewed as win-lose propositions. Consider this counterexample. Suppose a shareholder sells at a capital gain and has a better use for the funds. Those shares may still change hands at a price permitting further appreciation for the buyer. Such an exchange forms a classic “win-win” non-zero result. Of course, the sale of declining shares at a loss may incur further impairment for buyers in a “lose-lose.” Either possibility reflects the non-zero sum game.
Although direct confrontation is the key trait of the zero sum game, further analysis may draw a different conclusion in many cases. Consider the labor union strike. Do mutual interests with management remain? Can the parties still negotiate? Could the duration of the strike impart an inevitable “lose-lose” outcome? Such an inquiry offers productive angles for identifying the interactive dynamics of a non-zero sum game.
The time horizon itself often shapes the ongoing nature of a game type. A temporarily saturated product market may feature rivals competing for each other’s market share, as in today’s video distribution arena. A subsequent innovation or regulatory change may next spark a brand-new price point or influx of many more customers to expand that market. Or a growing business sector may suddenly stall into a zero sum game with the emergence of a viable substitute offering. Many scenarios are conceivable.
All involved, whether leaders or rank-and-file players, in both the private and sectors are well-advised to evaluate the interactive characteristics of a specific case when devising strategies and making decisions.
To practice identifying the non-zero sum game, let’s now proceed to the following quiz.