In digital era, collaborate or compete? - Revisiting game theory

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Prisoner's dilemma framed in 1950 is such a powerful depiction of individual behavior that we need to revisit this again in today's digital era;  Digital era where new tech companies are disturbing Goliaths. 

Before we discuss about this framework, I will like to introduce two terms: unstable/ stable equilibrium point using below drawing. Gravity ensures that any push from equilibrium point will  lead the ball to Stable equilibrium point. 


In prisoner's dilemma, two prisoners can either cooperate with each other and get punitive punishment or defect keeping own interest in mind. This is classically known as non-zero-sum game where one's win does not mean another's loss.  Here the stable equilibrium point is where both defect because of self-interest and get moderate punishment. 


In today's era, where startups and tech companies are disrupting the industry, the funding houses are investing in them assuming that they are going to unlock value and create new market altogether and not that they will take more market share. So the industry is no more a zero sum game but a non-zero-sum game. Hence, corporates and start-ups need to collaborate with good faith for the betterment of industry and consumers. 

In the first picture, self-centricity is the gravity which forces legacy companies to chose Stable equilibrium by competing with each other. They think about "exclusivity"or "non-compete" kind of collaboration with start-ups. On the other hand, Consumer-centricity is the buoyant force which encourages few to think about consumers and truly collaborate with each other to achieve the Unstable equilibrium. 

As rightly said by Satya Nadella, CEO of Microsoft "Can we create more value for customer by coming together as one entity or as two?"





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