How Managers Can Use Game Theory (and the 80/20 Rule) to Make Smarter Project Decisions
If you’ve ever made a project decision that looked perfectly logical—only to watch it unravel once people got involved, you’re not alone.
Projects don’t fail because we can’t decide.
They fail because we forget that other people are deciding too.
Competitors react.
Stakeholders push back.
Vendors renegotiate.
Teams quietly optimize for their own priorities.
3 Decision Games to Know
Prisoner’s Dilemma
Nash Equilibrium
Zero-Sum
On ProjectSkillsMentor, we spend a lot of time discussing practical decision-making—such as make vs buy, scope management, risk mitigation, and business case value realization. I highlight the sum of these concepts in my Project Managers Tool Kit.
But project managers can’t always follow the obvious path. Launching and landing your project takes finesse and insight. Adding Game Theory into the Project manager's toolkit can give you an edge. Not as an academic exercise, but as a way to think more clearly about decisions that depend on other people’s behavior.
What You Need to Know about Game Theory
What game theory really is (in business terms)
When it’s useful, and when it’s not
How to apply it without overcomplicating your project
Why combining it with the 80/20 rule makes it far more effective
Why Game Theory Matters for Project and Business Decisions
Most decision frameworks assume a simple world
You analyze options
You choose the best one
Everyone supports it
Real projects don’t work like that. Game theory starts from a more realistic assumption. Your outcome depends on how others respond to your decision.
For Decision-makers and Managers, this matters because
Many project decisions involve negotiation or competition
Stakeholders have different incentives
Rational decisions can still lead to poor outcomes
Game theory doesn’t replace good judgment; it adds structure to decisions that already feel messy.
What Is Game Theory (Without the Jargon)?
In practical terms, game theory is a way of thinking about decisions where
More than one party is involved
Each party has choices
Each party’s outcome depends on what others do
In projects and business
Players are stakeholders, vendors, competitors, and teams
Actions are the choices available to each player
Payoffs are things like cost, schedule, risk, reputation, or control
Equilibrium is a stable outcome where no one benefits from changing alone
If you’ve ever asked
“What will they do if we choose this option?”
You were already using game theory, just informally.
Three Game Theory Models That Actually Apply to Projects
You don’t need to learn all of game theory. You need to understand the key concepts that keep showing up in real decisions.
1. Prisoner’s Dilemma: Cooperation Isn’t Automatic
Prisoners in Projects: Why Teams Hide Risks
The Prisoner’s Dilemma explains why rational people make decisions that lead to worse outcomes for everyone. When cooperation feels risky, individuals protect themselves, even when working together would produce better results.
Your project can fail when teams or vendors hide risks, delay bad news, or over-commit to protect their position. Early transparency would help the project, but fear of blame or penalty pushes everyone toward silence, which increases costs, delays, and conflict.
What incentives make people afraid to speak up?
Are we rewarding early risk disclosure or punishing it?
What would change if “bad news early” was safer than “bad news late”?
Best used when
You rely on long-term relationships
Trust and cooperation affect outcomes
Avoid when
The interaction is one-time
There’s no accountability or future consequence
What It Looks Like in Projects
Two parties can either:
Cooperate (share information, align schedules, act in good faith)
Betray (optimize outcomes for themselves, withhold information from the other party)
The Prisoner's Dilemma is a scenario in which two individuals, acting in self-interest, often choose to betray each other, leading to a worse outcome for both than if they had cooperated. Why, because when communication is lacking, we often assume the worst about others.
If both cooperate, everyone wins.
If one “betrays” the other to their own self-interest, while the other cooperates. The betraying party wins short term.
If both betray, everyone loses.
Why It Matters
Many project conflicts aren’t about bad intent—they’re about fear of being the only one who cooperates.
Game theory helps you stop asking:
“Why won’t they just work with us?”
And start asking:
“What incentive would make cooperation the rational choice?”
2. Nash Equilibrium: Stable Doesn’t Mean Perfect
Go Beyond Nash Thinking
A Nash equilibrium exists when each party has chosen the best possible decision given the actions of others, and no one can improve their outcome by changing their own decision. But continuing to manage limited resources in the same old ways may be a problem that can't be solved if no one reconsiders all options.
Step out of the Nash cycle of best choice given bad options, into redesigning the problem by asking a few questions:
Can the SME mentor someone with enough skills to step up?
Can the effort requirements be changed if the work is redesigned?
Can AI or other tools reduce the workload and allow the SME to focus on task validation instead of work creation?
This alternative to the Nash Equilibrium can help you identify new best outcomes (or payoffs) for both parties.
Best used when
You’re in a competitive or constrained environment
Changing strategy alone won’t improve outcomes
Avoid when
You can redesign the rules or incentives
The best business outcome can’t be addressed by both managers optimizing their decisions independently
What It Looks Like in Projects
Everyone is doing the best they can
Given what everyone else is doing
The situation is good, but not optimal
Resource standoffs in cost, price, or staff
“This is how it’s always done” mindset exists
Why It Matters
Managers often waste time optimizing decisions that are already at equilibrium. If both were making good choices, it may be the best within the framework, but it may not be the best overall decision.
Game theory helps you recognize when:
Incremental changes won’t help
You need a structural change instead
3. Zero-Sum Games: When Trade-Offs Are Real
Moving Through Zero-Sum (Not Around It)
Continuing to search for win-win outcomes in a truly zero-sum decision can create false hope and unnecessary conflict. When resources are fixed, and only one option can be funded, the problem cannot be solved by reframing.
Savvy Managers will ensure they have answers, allowing them to ‘win the game’. So get a one-on-one with the key decision-maker to address questions like:
What criteria matter most right now?
What outcome best supports the business?
What trade-offs are we accepting by choosing my project?
How do we maximize the future value with my project vs the options not selected?
Smart Managers don’t pretend that zero-sum decisions aren’t painful. Their strategy is to make their option the best by being intentional and aligned with the business.
Best used when
Resources are fixed
One side’s gain is another’s loss
Avoid when
Value can be expanded through collaboration
What It Looks Like in Projects
Fixed budgets
Competitive bids
Schedule compression trade-offs
Why It Matters
Not every decision can be win-win. Zero-sum thinking happens on projects all the time. Whenever: Nothing is created. Nothing disappears. Value is simply reallocated.
So if you find yourself in a zero-sum situation:
Be clear about trade-offs
Negotiate more effectively
Avoid pretending collaboration will magically create value
Sometimes, realism beats optimism.
How Game Theory Improves Decision Outcomes
Used correctly, game theory helps Managers
Anticipate resistance before it happens
Identify misaligned incentives
Reduce “surprise” reactions after decisions are made
A simple application process
Identify who actually influences the outcome
Understand what each party values
Consider how they’re likely to respond
Adjust incentives or sequencing accordingly
Review decision-making and decision-makers to learn for next time (because there usually is one)
Notice what’s missing. No complex math. No advanced modeling. Just structured thinking.
The 80/20 Rule: Where Most People Get Game Theory Wrong
Know Which Game To Play
Not every decision requires deep thought. The 80/20 rule helps project managers focus on the small number of decisions and risks that drive most project outcomes. By identifying high-impact, high-dependency issues in your risk register, you can quickly decide when game theory applies—and choose the right model, whether it’s Prisoner’s Dilemma, Nash equilibrium, or a zero-sum decision.
Use the same process as your risk register, and ask these questions:
What is the chance of the problem coming up?
If it does, how big is the impact?
Are others involved? If so, do they have different goals and motivations?
Which game theory can best help me?
Here’s the mistake many teams make: They try to model everyone and everything. That’s unnecessary.
The 80/20 rule tells us that
A small number of factors usually drive most outcomes
In decision-making
20% of stakeholders create 80% of the impact
20% of decisions trigger 80% of reactions
20% of risks cause 80% of problems
How 80/20 and Game Theory Work Together
Think of it this way
80/20 helps you decide what’s worth analyzing
Game theory helps you analyze it well
Instead of modeling the entire organization
Focus on the few players who matter most
Apply game theory only where behavior will meaningfully change outcomes
This keeps decisions practical, fast, and grounded in reality.
What This Means for Managers
Good Managers don’t aim to predict everything. They aim to predict enough.
By combining
The focus of the 80/20 rule
The structure of game theory
You get decisions that
Are easier to explain
Are harder to derail
Hold up once people start reacting
You stop asking:
“What’s the best decision on paper?”
And start asking:
“What decision will still work once everyone responds?”
Game theory isn’t about turning projects into math problems.
And the 80/20 rule isn’t about oversimplifying decisions.
Together, they help you
Focus on what really matters
Anticipate behavior instead of reacting to it
Make decisions that survive real-world complexity
In projects, the quality of a decision isn’t proven when it’s made. It’s proven after people respond.
And that’s exactly where game theory, and a little 80/20 thinking, earns its place in the Project Manager’s toolkit. Learn more about the power of negotiation skills that can help you execute the decisions you’ve made.
