Game theory is a popular mathematical framework that is used to study the decision-making process when two or more players are involved. One of the key concepts in game theory is the trigger strategy. In this article, we will discuss what a trigger strategy is and how it works in game theory.

What Is a Trigger Strategy?

A trigger strategy is a type of strategy that is used in game theory to enforce cooperation between players. It involves setting up a system of punishments and rewards that incentivizes players to cooperate with each other. The idea behind a trigger strategy is that if one player deviates from the agreed-upon course of action, they will trigger a response from the other player that will punish them for their deviation.

How Does a Trigger Strategy Work?

To understand how a trigger strategy works, let’s consider an example. Suppose two companies, A and B, are competing for market share in an industry. They can either choose to cooperate with each other by sharing resources and information or compete against each other by keeping their resources and information private.

If both companies decide to cooperate, they can maximize their profits by sharing resources and information. However, if one company decides to defect and keep their resources and information private, they can gain an advantage over the other company.

To prevent defection, the two companies can use a trigger strategy. They can agree on a set of rules that dictate what will happen if one company deviates from the agreed-upon course of action.

For example, they could agree that if one company decides to keep their resources and information private, the other company will respond by doing the same. This would result in both companies losing out on potential profits.

Alternatively, they could agree that if one company decides to keep their resources and information private, the other company will respond by launching a marketing campaign to steal customers away from them. This would punish the deviating company and incentivize them to cooperate in the future.

Advantages and Disadvantages of a Trigger Strategy

The main advantage of a trigger strategy is that it can incentivize cooperation between players. By creating a system of rewards and punishments, players are motivated to act in the best interest of both themselves and the other player.

However, there are also some disadvantages to using a trigger strategy. For one, it can be difficult to set up an effective trigger strategy that both players agree upon. It also requires a high level of trust between the players involved since each player must believe that the other will follow through with their end of the bargain.

Conclusion

In game theory, a trigger strategy is a powerful tool for enforcing cooperation between players. By setting up a system of rewards and punishments, players are incentivized to act in the best interest of both themselves and the other player. While there are some disadvantages to using a trigger strategy, it can be an effective way to achieve mutually beneficial outcomes in competitive situations.