The Art of Strategy

• Example: Providing benefits in cash may encourage people to pretend to have physical disabilities, providing benefits in kind (such as wheelchairs) may solve this problem.
• Reference: Joseph Stiglitz: the insurance market problem.
• Reference: George Akerlof: the car market for lemons, demonstrating that asymmetric information can lead to market failures - in the example selling cars becomes more attractive to the owners of bad cars.
• Insight: In-kind benefits can serve as screening devices against asymmetric information.
• Insight: Contracts can create incentives for parties to reveal information.
• Insight: Information asymmetries in the insurance market drive the cost of insurance higher and higher, such that people at lower risk have less incentive to buy relatively expensive policies, whereas people at greater risk have a larger incentive to buy larger policies.

• Examples: Everyone trying to cheat on taxes, arriving at parties an hour after the stated time, driving above the speed limit.
• Examples: The use of QWERTY keyboards.
• Insight: Reasons for inferior standards may be behavioural rather than technological.
• Insight: Moving from one equilibrium to another is achieved most effectively by short and intense campaigns - by getting a critical mass of people to switch.
• Insight: Individuals cannot change social convention.
• Reference: Brian Arthur, Standford economist refers to the adoption of gasoline powered vehicles in 1890s over electric or steam.

"When you surround an enemy, leave an outlet free."

- Sun Tzu

Insight: Sun Tzu advised to leave your enemy an escape route, to prevent them from committing to fight to the death with increased spirit and desperation.

Insight: We can build commitment by denying ourselves the opportunity to retreat.

• Reference: Garrett Hardin, biologist - the example of overgrazing common land in 15th and 16th century England.
• Reference: Elinor Ostrom - studies to resolve tragedy of the commons, to preserve common property resources.