Memo: Amazon Empire the Rise and Reign of Jeff Bezos

Subject: Behavioral Game Theory, Active Choice Bias, Certainty Effect, and Altruism

The CTMs applied in the case of the rise and reign of Jeff Bezos are behavioral game theory, active choice bias, certainty effect, and altruism.

Game theory is an analytic method that helps to study decisions, interactions and strategies in a variety of economic, political and social contexts. Researchers in this area analyze games such as chess or poker by bringing together the principles associated with group behavior through the mathematical concepts of probability and decision theory. It is important to understand how particular outcomes can emerge given different rules and subsequent personal choices. Game theory encourages an interdisciplinary approach by combining economics, mathematics, psychology and computer simulations. While often used in game show environments, it has implications beyond entertainment; leading economists have argued that insights from game theory could provide better solutions for a wide range of real-world collective pursuits including environmental and public health issues.

The phenomenon of active choice bias is a cognitive bias in decision-making that occurs when individuals rely on their initial choices, even if the specific elements of the choice change over time. This is most often seen in consumer preferences, such as preferring a particular brand of computer or phone after buying it. It can also be seen in situations where individuals feel they have made an active choice, such as when choosing jobs or apartaments. Active choice bias is distinct from commitment bias, which affects decisions made by groups and can be triggered by investment of social capital or resources. Both phenomena can create potential consequences for decision-makers and those involved. As such, understanding how to address and mitigate active choice bias is critical for making well-informed choices and ensuring successful outcomes.

The certainty effect is an economic concept related to decision-making that suggests people are more likely to make a choice if the outcome of selecting that option has a known result. This phenomenon, which is also called the known-unknown effect, occurs when there is either complete certainty or uncertainty regarding the input and output associated with decision-making. It has been observed in multiple settings, from investors' decisions to allocate funds to firms making marketing investments. The certainty effect has been used to study human behavior and explain both individual and collective decision-making. It is also valuable for understanding how people evaluate potential options and assess potential outcomes, as well as for identifying ways to make better decisions in uncertain environments.

Altruism is a concept that is commonly described as an action or behavior that benefits another person while not providing any benefit to the actor themselves. For example, donating money to charity or taking time out of one's day to help a stranger would both be considered altruistic acts. Humanitarianism and self-sacrifice are values associated with altruism. Over the decades, theories examining why humans practice altruism have been proposed; evolutionary psychology suggests it's an evolutionary trait while social preferences theory suggests it's related to...…prior; so it is safe to say that Bezos was an innovator far ahead of his time.

He also applied Game Theory by using strategic thinking to purchase the Washington Post as a way to keep media from dragging down Amazon. By acquiring an established media voice with a broad readership, Bezos became aware of potential reportage against Amazon and made sure that it could be identified and effectively addressed before any reputational damage could occur. His decision-making within this context certainly indicates he had thought out his acquisition from multiple angles and was keenly aware of the effects it might have. Therefore, through his application of game theory principles, Bezos demonstrated a clear understanding that by taking control of a major national news publication he had given Amazon a platform for meaningful debate about its activity and value as a digital retailer.

Bezos finally applied Game Theory when, by using strategic thinking, he purchased Whole Foods to compete with the grocery market conglomerates. Bezos did not just plan the move for selling groceries online, but moreover revolutionized the retail grocery market. By leveraging his powerful position as a prominent figure in the tech industry, he elevated Whole Food's market presence and stirred up competition among some of the biggest supermarket conglomerates like Walmart and Kroger's. This decision has made huge waves that are still affecting these multinational companies today and enabled him to capitalize on opportunities typically reserved for large corporations and conglomerates thanks to his innovative take on traditional game theory…