Dominating Strategy

It can happen that one of the participants in a decision situation has a higher payoff for sure with a certain decision option than others, independent of the decisions of the others. In such a case, they have found a strictly dominating strategy variant with this option. If the payoff in each case is at least equal to that for any other participant, then this strategy variant is said to be (only) dominating, but not strictly dominating.

In practice, frameworks can be designed and shaped by institutions (rules) in such a way that one participant acquires a dominating or even a strictly dominating strategy. Game theory provides the tools to systematically penetrate situations and to prepare the appropriate course of action.

Example: One of two business partners has acquired a relatively superior market power. They may be economically superior or have a (perhaps only temporary) unique position. Then the business partner, be it a supplier or a customer, can dictate their terms. Such situations can also arise when there are supply bottlenecks for a customer in the supply chain or a supplier is under sales pressure.


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