180 Strategy Change

Season 5, Episode 7: Teaching game theory? Sharks are notorious for playing hardball in ultimatum games, as seen in this negotiation. Solomon Fallas has developed a red solo cup that doubles as a shot glass and is asking for $300k in exchange for 15% of his company. Daymond makes him an offer almost immediately: $300,000 for 20%. Then comes the ultimatum – Solomon has to decide at that moment, or the offer is off the table. Solomon chooses to reject the offer, thinking others will make better offers (the perceived benefit of this choice outweighs the perceived cost). This seems rational at the time, since Daymond is sending a strong signal that he thinks the sharks may compete over the 180Cup. However, the other sharks drop out of the bidding. Daymond clearly thought 20% of the company was worth a $300k investment, but now, he refuses that deal. Why? With no competition, he can set his price, but he also has to consider the credibility of his ultimatum. Daymond and the other sharks are in a repeating game of sorts. New entrepreneurs enter the tank each week, but they have had the opportunity to review the sharks’ strategies with previous players. If Daymond were to rescind his ultimatum for Solomon, subsequent players may not believe future ultimatums and adjust their game strategy accordingly.