Applications of metagame theory in managerial decision making

Abstract

The quantitative models of operational research and management science have an important part to play in support of the decision problems of modern organizations. However, these models may not be of assistance in many of the problems facing senior management. Lacking formal models, managers tend to approach such problems by methods that involve satisficing, minimization of uncertainty and the search for equilibria. This suggests that many of these problems could be approached by use of game theoretic ideas and concepts. Such an approach is available based on metagame theory. This approach (called metagame analysis or the analysis of options) can be applied to conflict situations, to decision making under uncertainty and to situations where the ‘opposition’ appears to come from a mix of uncertainty about future events and the actions of others. This paper provides a description of the metagame approach and a comparison of this method with more conventional decision making techniques.