Strategic Thinking &

Decision Making
Session 6: Strategic Moves

IIMB Strategic Thinking & Decision-Making, Lecture 6 1

Strategic move is one when the first player’s action

can change the response rule for the second
player and gives an advantage to the first.

It is a means by which ‘cooperation’ of the

other player creates advantage for the first.

It can change the structure of the game

Burnt bridges (boats)

Scorched earth
IIMB Strategic Thinking & Decision-Making, Lecture 6 2
 Burning your bridges (boats)?

• Hernan Cortes in South America

– Why is burning your own boats / bridges a good
strategy?
• “To a surrounded enemy, you must leave a way
of escape.” - Sun Tzu
– Does it not contradict the ‘burning boats’
strategic move?
– Why did Sun Tzu suggest this approach?
IIMB Strategic Thinking & Decision-Making, Lecture 6 3

Scorched Earth
“We must organise a merciless fight. The enemy must not lay
hands on a single loaf of bread, on a single litre of fuel.
Collective farmers must drive their livestock away and
remove their grain. What cannot be removed must be
destroyed. Bridges and roads must be dynamited. Forests
and depots must be burned down. Intolerable conditions
must b created for the enemy.”

- Josef Stalin, proclaiming the Soviets’ scorched earth

defense against the Nazis, July 3, 1941.
Source; Dixit & Nalebluff
IIMB Strategic Thinking & Decision-Making, Lecture 6 4
 Biotech Battle 1
China
Lo Hi

Lo 6, 5 4, 6
India

Hi 5, 4 3, 3

Should India play the dominant strategy?

India unilaterally announces Hi Road!

How can India make China believe it?

IIMB Strategic Thinking & Decision-Making, Lecture 6 5

Biotech Battle 2
Game Tree (India, China)

India

Hi
Lo
China China

Hi Lo Hi Lo

3, 3 5, 4 4, 6 6, 5

India commits to creation of biotech fund for R&D!

How can India make the commitment credible?
IIMB Strategic Thinking & Decision-Making, Lecture 6 6
 Was India’s action in
Biotech Battle a
Strategic Moves strategic move?

What kind was it?

Initiative
Unconditional
Compellent
Strat. Move Promise

Conditional Response Rules Deterrent

Compellent

Threat
Deterrent

Designed to change the other player’s response.

IIMB Strategic Thinking & Decision-Making, Lecture 6 7

Characteristics

• Warnings and assurances are informational

• Threats and promises are strategic moves
• To be credible
– Your threat or promise should be observable to
the other party
– Their actions should be observable to you
• A strategic move aims to create advantage by
changing the other player’s decision rule

IIMB Strategic Thinking & Decision-Making, Lecture 6 8

 Characteristics

• Promises and threats

– How can we make promises and threats credible?
• Commitment!
– A move you cannot take back  associated cost
• Warnings and assurances
– What if the player had a strong reputation for doing
what they said?
• What is the value of reputation?
• How can one build reputation?
IIMB Strategic Thinking & Decision-Making, Lecture 6 9

The Cuban Missile Crisis

IIMB Strategic Thinking & Decision-Making, Lecture 6 10

 The Cuban Missile Crisis - 1

• Game simultaneous or • Why did Kennedy order

sequential? – Low altitude
• Was Kennedy’s move – reconnaissance flights
quarantine of Cuba - over Cuba?
strategic?

Information:
To mitigate uncertainty

IIMB Strategic Thinking & Decision-Making, Lecture 6 11

The Cuban Missile Crisis - 2

At 7:00 pm EDT on 22 October, Kennedy delivered a
nationwide televised address on all of the major networks
announcing the discovery of the missiles. He noted:

“It shall be the policy of this nation to regard any nuclear

missile launched from Cuba against any nation in the
Western Hemisphere as an attack by the Soviet Union on the
United States, requiring a full retaliatory response upon the
Soviet Union.”
Was Kennedy’s message a promise, threat, or warning?
Was it credible?
IIMB Strategic Thinking & Decision-Making, Lecture 6 12
 The Cuban Missile Crisis - 2
At 7:00 pm EDT on 22 October, Kennedy
delivered a nationwide televised address Blockade by hundreds
on all of the major networks announcing of US Navy warships in
the discovery of the missiles. He noted:
the Caribbean Sea.
“It shall be the policy of this nation to
regard any nuclear missile launched from
Cuba against any nation in the Western
Strategic Air Command
Hemisphere as an attack by the Soviet bombers to fly towards
Union on the United States, requiring a full USSR?
retaliatory response upon the Soviet Union.”

Was Kennedy’s message a promise, threat, or warning?

Was it credible?
IIMB Strategic Thinking & Decision-Making, Lecture 6 13

The Cuban Missile Crisis - 3

• Why did Robert Kennedy • Significance of the
meet Anatoly Dobrynin shooting down of U2?
privately? • A U2 recon plane strayed
• Why did Alexandre Fomin into Soviet air space on
request meeting with John Oct 27. Both sides
Scali? scrambled fighters (US
with nuke tipped A-to-A
missiles). What does the
incident highlight?
Insurance: avert a bad outcome! Many players
 Errors in implementation
IIMB Strategic Thinking & Decision-Making, Lecture 6 14
 The Cuban Missile Crisis - 4

• Could the Soviet reaction have been different?

• Was the outcome reasonably certain (high
probability)?
• What are the natural characteristics of
Kennedy’s strategic move?
• How do you ensure you are believed?

IIMB Strategic Thinking & Decision-Making, Lecture 6 15

“Nuclear catastrophe was hanging by a thread ...

and we weren’t counting days or hours, but
minutes.”
- Anatoly Gribkov, Soviet General and Army Chief of Operations

IIMB Strategic Thinking & Decision-Making, Lecture 6 16

 What are the characteristics of brinkmanship?

What are the risks of brinkmanship?

IIMB Strategic Thinking & Decision-Making, Lecture 6 17

Brinkmanship

• A special class of unconditional strategic move:

– Unilateral, voluntary loss of control
– Uncertainty: probabilistic nature of player’s responses
• Errors of execution, actions by either player
• Probabilistic outcomes
– Imposes cost on both players
– Escalates risk of failure
• Characteristic of a slippery slope, not precipice
Not all unconditional strategic moves are brinkmanship.
IIMB Strategic Thinking & Decision-Making, Lecture 6 18
 Strategic moves … when to play?

• When rules are loose or unknown

• Imperfect information on strategies, payoffs
• Reputation of one of the players is evidence of
– Commitment
– Ability to act
• Risk and uncertainty from…..
– Unknown attitude of the other player
– Probabilistic nature of payoffs
– Errors in execution
• Risk of the move going horribly wrong!!
IIMB Strategic Thinking & Decision-Making, Lecture 6 19

Managing Risk by Establishing Credibility

1. Formal contracts
2. Create reputation by action
3. Cut off communication
4. Burn your bridges
5. Let chance determine the outcome
6. Small steps at a time
7. Teamwork builds credibility
8. Use a mandated negotiating agent

IIMB Strategic Thinking & Decision-Making, Lecture 6 20

 Strategic Moves – Other Examples?

• What kind of strategic moves were these?

– Japanese attack on Pearl Harbor , Dec. 7, 1941?
– Gandhi’s Dandi (Salt) March?
– The Jan 2020 assassination of Maj. Gen. Qasem
Suleimani, Chief of Quds Force, Iran?
• Applications in bargaining?
• Uses in employee performance management?
– Effect of policies
– History of policy implementation
IIMB Strategic Thinking & Decision-Making, Lecture 6 21

A carpenter builds a table from a tree. The

strategist makes a tree from a table!

- Dixit & Nalebluff

IIMB Strategic Thinking & Decision-Making, Lecture 6 22