Facing the Consequences: The Impossible Lack of Incentives in Berg’s Analysis

 

In her analysis “Competition and Cooperation, the Wisdom to Know When” Berg utilizes a “red-blue” model, an experiment similar to the prisoner’s dilemma, to apply determine competitive behaviours in business. Although the simplistic experiment may apply in a theory or a game like the “red-blue” model, it cannot possibly apply to real world business, as implied by Berg, due to its sheer simplicity, as the complexities of incentives and consequences cannot be captured within the 90 minute experiment.

The most glaring issue with Berg’s model is its lack of representation of incentives, both positive and negative, placed on the participants. As described in her paper, Berg’s participants called her experiment “just a game”, which often gives them different and much less powerful incentives in comparison to a real situation. For example, when faced against a rival company, a worker has multiple powerful incentives nudging him towards a decision. If his current company is profiting less than the rival company, but plans on giving the worker a raise, the worker will be incentivised to stay with the company, whereas if the company plans on demoting the worker, he might be incentivised to be less productive on the job, or to seek a new position in the rival company even if makes his current company profit less. Furthermore, if the rival company informs a worker that they may face a decrease in salary due to poor productivity, a worker will be pressured to improve his performance, or might be pushed to going on strike in order to protest the company. In addition, many employees will actively push agendas against the benefit of their company if there is an incentive for their own benefit, or if there is a negative incentive that will occur if they do not. Berg’s “red-blue” model does not account for these types of incentives often present within real world business, as her experiment’s consequences and benefits are far less serious. In fact, most participants often saw “ a clear line between lying in a ‘game’ and lying in a ‘real business situation’”, as Berg’s “game” entailed in far less impactful incentives, losing and gaining imaginary points, in comparison to real business situations where decisions can change the path of your life.

In her “Fair Play” section, Berg states that when in danger of being treated unfairly, “we mobilize all our resources … to prevent the other party from gaining the other hand but also to get more than our fair share”. Although this may be apparent in the “red-blue” experiment, with teams performing “suicide mission” strategies in order to prevent the other from gaining more points, the issue of consequence prevents this from being applicable in a realistic situation. In Berg’s experiment, the most the suicide mission team would lose per game would be the imaginary and arbitrary points given by the rules, whereas in a real world scenario the livelihoods of hundreds, if not thousands of people may cost of applying the same suicide mission strategy. Many cases in business, people or companies would seek to preserve the assets they have and slowly expand against each other, rather than having some companies deliberately harming their assets due to poor performance in order to damage other companies. For example, before folding into folding into the Warner Brothers Conglomeration in 1989, the failing DC Comics did not attempt to ruin their competitor Marvel Comics by using Berg’s suicide mission strategy, opting to try to secure what assets they currently had on them. Likewise, even as Sony Studio’s grip over the film market weakened in comparison to that of Disney Studios, Sony did not try to sabotage Disney by further ruining their company.

Although Berg builds her arguments and gathers evidence through her “red-blue” experiments, most of her claims apply to business and commerce in the real world. However,with the usage of  such an elementary model, many of Berg’s claims can be seen as a misdepiction and oversimplified version of real world events. In realistic situations the incentives and consequences that fuels the invisible hand which pushes an individual to a decision are far more severe, and Berg’s 90 minute “red-blue” model fails to account for these motivations due to its simplicity.

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