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Successful IMC Marketing: Moving Beyond the Nash Equilibrium and into Game Theory with Cognitive Psychologists

The standard economic models used to study marketing communications usually focus on game theory and the use of the Nash equilibrium. Economic theorists who use these models view their consumers as narcissistic and self-interested. In game theory, the Nash equilibrium assumes that when each player knows the equilibrium strategies of the other players, no player obtains anything by modifying his/her strategy; therefore, all parties will keep their strategies unchanged (Camrer, 2003). The Nash equilibrium is applied to market model tests that are based on the assumption that the marketers know the consumer’s strategy, and the consumers know the marketers’ strategy.
However, this assumption of self-interest fails to explain humans’ desire to seek equality; therefore, self-interest and economic theory should not rely solely upon this assumption. Marketing strategists have heavily tested the Nash equilibrium, finding that it works well in certain situations, but poorly in others. Despite this and the fact that it has been failing in economic game theory, the Nash equilibrium has been generalized as the standard. However, to force better specification standards on the Nash equilibrium, cognitive psychologists are experimenting on the approach it should take to situations that it has not adapted to successfully. In addition, marketing theory research has begun to apply cognitive psychology to make the Nash equilibrium more effective in specific situations. To this end, cognitive psychologists are analyzing the use of game theory and the Nash equilibrium in marketing by using psychology tests not previously applied to the Nash equilibrium. Their results suggest that the combined use of game theory and cognitive psychology generates a more successful marketing perspective than the Nash equilibrium alone. The goal of this research will be to demonstrate how the combined application of cognitive psychology and game theory can create a more effective marketing focus than can use of the Nash equilibrium alone.

References
Camrer, C. (2003). Behavioral game theory: Experiments in strategic interaction. Princeton, NJ: Princeton University Press.

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