John Nash, Game Theory and Marketing Success

Mathematician John Nash, who died in a crash over the weekend, made a seminal contribution to game theory that is applied virtually everyday in multiple academic fields, sports and marketing.

Mathematician John Nash, who died in a crash over the weekend, made a seminal contribution to game theory that is applied virtually everyday in multiple academic fields, sports and marketing.

Math and mathematicians rarely become central figures in Hollywood films, let alone with an Oscar. John Nash, the Nobel prize winner for his insight on game theory and the victim in a fatal taxicab crash over the weekend, was the exception.

Fivethirtyeight.com carried a eulogistic blog titled "Why John Nash Matters" that suggests the "Nash Equilibrium" informs many academic disciplines, how soccer goalies defend against penalty shots and everyday strategies in business and love.

Nash's key discernment is that people don't pursue strategies in a vacuum; they undertake strategies based on what they perceive as their opponent's strategies. 

Rendered in sports terms, defensive coordinators don't use a set defense against every team and on every play. They adjust during the game based on their opponent's offensive tendencies, an individual player's performance and the game situation. Coaches would call this "mixing it up." Nash would have called it "mixed-strategy equilibrium."

Sophisticated adherents of Nash Equilibrium analyze the range of opponent's moves before picking a strategy. This has a parallel in marketing research – size up competition, gauge the consumer attraction of competitive features, test consumer needs and preferences, then pick a marketing strategy.

Marketing is a comfortable fit in the house that Nash built. But while he described the game, it takes research to know how to play the game well.

Again, back to sports. If a team kicking penalty shots always kicked the ball to one side, the goalie would be wise to lean in that direction. If kicks go to both sides of the net, the goalie has to adopt a more balanced posture – unless he knows that a particular penalty kicker has tendencies that allow the goalie to guess.

The takeaway from Nash is most strategies are nuanced.

What market research contributes to Nash's brilliance is the knowledge to make nuanced strategies work.