Donald Trump does not look or sound like a typical politician. His presidential campaign has been far from typical, and his bombastic remarks have already offended many immigrants, fellow Republicans, war veterans, and women. Weeks ago the Huffington Post suggested his campaign was a sideshow that it would cover not as political news but rather as entertainment news, alongside stories for the Kardashians and The Bachelorette.

Don’t let appearances fool you. Trump explains during interviews that he’s a smart person who went to the prestigious Wharton School of Business and built up a net worth of billions of dollars. Trump and his fans might call him a genius.

The truth lies somewhere in the middle. Although Trump is not a conventional politician who is crafty and well-prepared, he does have a history of understanding rules, making beneficial decisions, and optimizing towards a goal. In other words, Trump does think strategically, and it would be fair to analyze his actions using the lens of game theory.

In this post, I want to discuss how Trump’s campaign illustrates concepts from game theory. Specifically, I’ll discuss Trump’s retaliation against opponents, his threat to run as a third party candidate, and his stance on political correctness.

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"All will be well if you use your mind for your decisions, and mind only your decisions." Since 2007, I have devoted my life to sharing the joy of game theory and mathematics. MindYourDecisions now has over 1,000 free articles with no ads thanks to community support! Help out and get early access to posts with a pledge on Patreon. .

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1. Retaliation

Why is Donald Trump so sensitive to criticism? Why does he strongly attack opponents?

The chain store paradox is a game theory model that might shed light on his motivation.

Consider a company with store branches in 20 towns (known as a “chain store”). Currently the company is a monopoly and earns huge profits. But success breeds imitators, and in each town a new store is threatening to open up.

In business the rules of the game are understood. If a new store actually opens up, the existing store can take two actions. It can offer sales and trigger a price war that would be ruinous to both stores. Or it can accommodate the new store and be content to split the profits. What will happen, if the company evaluates the decision town by town?

The monopolist wants to keep competitors out. It will threaten to engage in a price war. However, if a store actually opens up, then the threat is meaningless. Rather than ruining profits for both stores, the incumbent store would be smart to accommodate. Splitting profits is not as good as monopoly profits, but it’s better than no profits at all in a price war.

If the company evaluates town by town, then logically it would accommodate a new store in each town. Furthermore, each new store knows this, and so the competing stores open up without fear of a price war. For them splitting profits is better than no profits from staying out.

Ultimately the chain store loses its monopoly in each of the 20 towns. And this is a strange sub-optimal result. What the chain store should have done is fight a few price wars early to demonstrate a tough reputation. This would have discouraged new stores from opening in other towns, and those monopoly profits would have more than made up for the losses from the few price wars.

(This kind of game is not just theoretical: it’s argued that airlines and retailers engage in costly price wars to deter competition).

So what does any of this have to do with Donald Trump?

Think about the number of people who have challenged him and how he has responded in each case.

Donald Trump is essentially playing a chain-store game. He is a front-runner and faces challenges across many dimensions of his political views.

In each individual conflict, he would be smart to let the feud resolve peacefully and amicably. But if he did that, he would be encouraging everyone to come after him since they would perceive he is weak.

Trump instead has been playing tough. Each time a politician has questioned him, he has fired insults back. And the feud damages both people involved, so it’s very much like a price war where both parties are hurt.

In response to perceived attacks, Trump has questioned Jeb Bush’s stance on immigration and the Common Core, said Rick Perry wears glasses to look smart, said McCain was a war hero because he was a prisoner of war–and that he preferred soldiers that did not get caught, and he gave out Senator Lindsay Graham’s cell phone number to a South Carolina audience. (As for Megyn Kelly, that is another case analyzed below in point 3).

Trump evidently is playing tough to discourage others from coming after him in the future.

That would seem to be a sensible strategy. However, so far this strategy doesn’t seem to be working because his growing popularity has brought increased scrutiny.

Furthermore, when Trump goes after Republicans, it does not make him popular with the Republican National Committee. It is perhaps for this reason Trump has kept some leverage for himself.

2. Running as a third party candidate

There’s still more than a year until the 2016 presidential election when a Democrat candidate faces off against a Republican candidate. And that’s why this is a dangerous time for each party.

Until each party has nominated a candidate, the field is open and so politicians are fighting within their own party. When Trump bashes Republicans, for example, it can eventually serve as ammunition for the Democrats.

A huge fear is that a candidate might lose the nomination but decide to run anyway as a third party. The third party candidate might steal votes from the party’s candidate, and this vote-splitting may ruin the party’s chances of winning the election, like when Ross Perot ran in 1992 (possibly spoiling the Republican vote) or when Ralph Nader ran in 2000 (possibly spoiling the Democrat vote).

Donald Trump wants the Republican nomination. But if he lost, would he be willing to support someone else?

This question was asked of all the major candidates in the Fox News Republican debate last Thursday. All the candidates pledged to support the eventual nomination. All except Trump. Look at how he’s happy to stand out from the group and listen to his reason.

Any candidate unwilling to support eventual GOP nominee?

Rand Paul was upset that Trump seems to be playing the field and keeping his options open. Might Trump even switch sides completely and support Hillary Clinton?

Trump seems to have a reason. His decisions are not being greeted well by the establishment Republicans. So Trump is worried the Republican Party might not treat him fairly, perhaps even treating him like a “sideshow” for entertainment value only.

Trump says his threat to run independently is his leverage. While he does not plan to run as a third party, he does not want to rule it out and lose negotiation strength.

The fact that Trump is treating the campaign like a business deal rubs many people the wrong way. But no worry, Trump does not care about the culture and tone of current political discourse.

3. Political correctness

Trump has a long history of hurling insults publicly. Megyn Kelly asked Trump to talk about the times he’s called women names like “fat pig” and “slob.”

Watch how Trump navigated this question.

Is Donald Trump part of the ‘war on women’?

There are two parts to Trump’s strategy. First, he deflated the seriousness of the question, to the crowd’s uproarious applause, by explaining he only said mean things about Rosie O’Donnell. (In 2006 they had a public feud after Rosie did a spot-on impression of Trump, who then got on shows and expressed his anger: Trump vs. Rosie feud).

The second part of his answer has a game theory component. Trump owned what he said in the past and explained he doesn’t have time for “political correctness.”

This is a serious matter. We have made great strides in society to stop openly racist, sexist, and misogynist language. And there is more work to be done.

In the process, there has been a side effect of “political correctness” for its own sake: people who say the “right things” only to avoid confrontation of an angry mob.

The problem of political correctness is it makes people unwilling to discuss if they actually disagree. And if people are afraid to speak their minds, then ultimately they may elect not to speak at all.

There is a game theory paper by Stephen Morris that describes the problem theoretically. Imagine an advisor that has useful information to offer to a listener. The advisor should be able to convey the information. (Suppose a university president is worried there are not enough women in science.) The problem is the listener might suspect the advice is biased, as the advisor does not want to be labeled as a biased person. (If the president said the differences might be due to genetics, then people might label the president a sexist.) If the advisor cares about reputation more than anything else, then the advisor has an incentive to lie or say nothing. (Mostly people avoid discussing gender inequality for fear of saying the wrong thing.) Political correctness can lead to an informed advisor not offering useful information.

Political correctness has its benefits and its costs. Trump is betting people care so much about honesty–even when he’s saying unpopular things–that he will come out on top. However, as pointed out in Bloomberg View, this is a very risky gamble. In Europe there are many popular politicians who speak out, but they are not commonly at the highest level of power.

Conclusion

Trump’s political campaign has been full of interesting political examples of game theory. Trump has so far thrived by playing tough, threatening to run as a third party for leverage, and by speaking his mind without regard to political correctness. But these are all short-term strategies with a hope to pay off in the long-term. We will have to see if Trump can sustain his campaign as there are still many more obstacles he has to navigate.