Dr. Barry Nalebuff is the Milton Steinbach Professor of Economics and Management at Yale School of Management. A graduate of M.I.T. and a Rhodes Scholar, he earned his doctorate in economics at Oxford University. Prior to appointment at Yale, Nalebuff was an assistant professor at Princeton University and a junior fellow of the Society of Fellows at Harvard University.

He is the co-author, with Avinash Dixit, of Thinking Strategically: The Competitive Edge in Business, Politics, and Everyday Life. The first popular book on game theory, Thinking Strategically is used at colleges and business schools worldwide. Nalebuff's second book, co-authored with Adam Brandenburger, is Co-opetition. This book applies game theory to business strategy. His work on "co-opetition" was first featured in a 1995 Forbes cover story on game theory and business.

In addition to his academic work, Nalebuff has extensive experience consulting with multinational firms. His work on bundling was featured in the GE-Honeywell merger case presented to the European Union Merger Task Force. Nalebuff was a featured strategy expert for People magazine on the TV game show "Survivor." Along with his former student Seth Goldman, he created Honest Tea, a company that produces and bottles iced tea that actually tastes like tea. He lives in New Haven with his wife and two daughters.

Introduction to Game Theory and Co-opetition

There's nothing so practical as a good theory. A good theory confirms the conventional wisdom that "less is more." A good theory does less because it doesn't tell people what to do. At the same time, it does a lot more because it helps people organize what they know and uncover what they don't know. A good theory gives people the tools to discover what is best for them. That was our goal in writing Co-opetition.

Co-opetition offers a theory of value. It's a book about creating value and capturing value. There's a fundamental duality here: whereas creating value is an inherently cooperative process, capturing value is inherently competitive. To create value, people can't act in isolation. They have to recognize their interdependence. To create value, a business needs to align itself with customers, suppliers, employees, and many others. That's the way to develop new markets and expand existing ones.

But along with creating a pie, there's the issue of dividing it up. This is competition. Just as businesses compete with one another for market share, customers and suppliers are also looking out for their slice of the pie.

Creating value that you can capture is the essence of the theory behind Co-opetition.

The best way to do this will obviously be different for different businesses. But one strategy that we emphasize is working with what we termed "complementors." A complementor is the opposite of a competitor. It's someone who makes your products and services more rather than less valuable. Not surprisingly, the complementor concept is especially relevant to the builders of the information economy. Hardware needs software, and the Internet needs high-speed phone lines. No one, alone, can build the infrastructure for the new economy. It's a whole new system made up of many complementary parts.

Thinking about the new economy, we've realized that there's a special connection here. The connection is with one of the great intellectual figures of this century, John von Neumann.

John von Neumann-mathematician, genius, polymath-died in 1957, well before he could see the emergence of the Information Age he helped create. Co-inventor of the modern computer architecture-today's programmable computer-von Neumann also did pioneering work on self-reproducing systems, presaging the discovery of DNA. Together with economist Oskar Morgenstern, von Neumann was also the inventor of game theory. Von Neumann's and Morgenstern's game theory provides a model of the pie and how it gets divided up. We rely on these insights throughout Co-opetition.

Game theory is a different way of looking at the world. Conventional economics takes the structure of markets as fixed. People are thought of as simple stimulus-response machines. Sellers and buyers assume that products and prices are fixed, and they optimize production and consumption accordingly. Conventional economics has its place in describing the operation of established, mature markets, but it doesn't capture people's creativity in finding new ways of interacting with one another.

In game theory, nothing is fixed. The economy is dynamic and evolving. The players create new markets and take on multiple roles. They innovate. No one takes products or prices as given. If this sounds like the free-form and rapidly transforming marketplace, that's why game theory may be the kernel of a new economics for the new economy. And this is why we see Co-opetition as a book for the Information Age.