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The Game Theory of Everythingsee the game you are already in
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Domain 04

Markets and Money

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Exchange is positive-sum; competition, pricing and contracting are where the strategic problems live.

Four structures cover most of it. Price competition among few firms is a prisoner's dilemma from the firms' side, which is why cartels are unstable and why competition law is about enforcement rather than exhortation. Quality that cannot be verified produces adverse selection and can unravel a market entirely. Anything shared and uncounted — air, groundwater, a shared reputation for an industry — is a commons. And bidding contests carry the winner's curse, which is why acquirers who win competitive auctions do so badly on average.

Two figures at a table exchanging two different objects, a ledger open beside them.
The player this field leaves off the list

Everyone downstream of the transaction who was not party to it — the neighbours, the future, the workers in the supply chain. Externalities are precisely the players nobody counted. Also the suppliers who exited quietly because they could not get paid for quality nobody could see.

What to look for

  • Is this genuinely positive-sum, or is somebody outside the deal paying for it?
  • Can the buyer verify quality? If not, expect the good sellers to be leaving.
  • How many bidders? More competition makes the winner's curse worse, not better.
  • Is a cartel unstable because of ethics, or because of the payoff structure?

The shapes that run this field

Shape 09

Positive-Sum

An interaction with genuine surplus: cooperation produces more total value than the parties began with.

Shape 01

The Prisoner's Dilemma

Mutual cooperation beats mutual defection, but defecting is the better move whatever the other side does.

Shape 13

Screening and Adverse Selection

Hidden information before the deal. The uninformed side designs the offer so that different types choose differently.

Shape 18

Auctions and the Winner's Curse

In common-value auctions, winning is evidence you were the most optimistic — so the winner systematically overpays.

Shape 06

The Commons

A rival but non-excludable resource: each user's extraction imposes a cost spread across all users.

In practice

The Prisoner's Dilemma

Two firms in a price war both would end tomorrow, neither able to raise first.

Screening and Adverse Selection

A freelance marketplace where nobody can verify skill and the competent quietly leave.

Auctions and the Winner's Curse

A contested acquisition won by whoever most overestimated the target.

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