The gameplay and strategy of Guandan resonate with the high sensitivity and importance Chinese people place on nonverbal information in social and business interactions. Just after the Labor Day holiday has ended, in addition to relaxation and leisure enjoyment, you might have played a few rounds of the currently popular “Guandan” with friends and family. Guandan is actually a type of card game played with two deck of cards totaling 108 cards, in which four people split into two teams of pairs compete, each holding 27 cards.
This year, this game originating from Huaian, Jiangsu has exploded in popularity in the financial world and is particularly well-received in the investment community, even surpassing the once wildly popular Texas Hold’em poker. This phenomenon is not just a substitution of entertainment methods but also reflects the liveliness of investors in the Yangtze River Delta region and a decreasing trend in dollar investments over recent years.
In the rules of Guandan, when playing cards one can use single cards, pairs, sequences, and other combinations, while four or more cards of the same rank can form a “bomb”, which is the only means of defeating any card combination other than a bigger bomb. The victory condition of the game is for the team to be the first to play out all of their cards.
One of the most enticing parts is the crucial “grabbing the landlord” phase of the game, which determines which team will have the right to play first. This phase means that the game is not merely about taking turns to play cards but is about the right to play being a rotating power based on the size of the previous round’s cards. This significantly increases the game’s unpredictability and the need for strategy, requiring team members to have good coordination and communication with one another.
Comparing Guandan to Texas Hold’em, we see a cultural reflection. Texas Hold’em is a competition that emphasizes individualism where players must optimize their strategies and meticulously calculate risks, similar to Wall Street stock trading, balancing investment with the redemption of benefits. In contrast, Guandan highlights cooperation and strategy between teams, requiring players not only to consider how to confuse their opponents but also to ensure their teammates understand their hand and strategy, sometimes even sacrificing short-term personal gains to ensure the team’s victory.
In the economics of Guandan, an important concept is opportunity cost. Similar to how cards that are played cannot be taken back, in Guandan, once a card is played, it represents the seizing of that moment’s opportunity, and once used, no matter how strong, it cannot be utilized again. Therefore, every play must be carefully considered.
The theory of “opportunity cost” in economics profoundly applies to all industries, including the game of Guandan. Opportunity cost is not a direct expenditure but rather the potential benefits forfeited by choosing a certain action. For example, when you have a trump card in your hand, by using it to gain an advantage, you lose the possibility of employing it in the future to contend for more opportunities. Thus, Guandan is not just a simple card game; each card played should be thoughtfully considered, weighing the balance between current benefits and potential future drawbacks.
In Guandan, the cards in a player’s hand are also like asset allocation. Players need to carefully contemplate how to arrange their hand to maximize its value. For instance, if you have a strong bomb and a few scattered cards in your hand, you might face a decision: whether to keep the bomb for a decisive victory or to break it up to form sequences and sets with kickers. This decision-making process is similar to how stock market investors strategically allocate their limited financial resources to different types of stocks and funds. Fundamental returns along with market trends and timing are important factors to consider in both situations.
In the card game Guandan, when player A leads with a small card such as a 3, it might signal the need for support from a teammate; or dropping a bomb in a non-critical situation could be a way to tell teammates that they have even stronger cards in hand. This strategy embodies the concept of “credible deterrence” from game theory, which is to demonstrate one’s strength to competitors, and at the same time ensure the confidence of allies, through seemingly unnecessary investments—like expanding an unnecessary factory. The core of this strategy lies in the “credibility of the signal”—the transmitted information needs to be not only received but, more importantly, believed. In Guandan, the strategy of “showing off strong cards” is irreversible, thus the irreversibility serves as a powerful guarantee for the credibility of the signal.
In the field of marketing, companies often convey the value of their products to consumers by heavily investing in advertising campaigns or showcasing their high-quality products. This practice is a signal transmission mechanism aimed at demonstrating the high quality and value of their products. A similar phenomenon is reflected in Guandan, where players sometimes need to sacrifice strong cards to send certain signals to other participants. This strategy, whether in the business field or in the game, involves enhancing the signal’s credibility by incurring certain costs (whether economic or strategic).
Economics of Guandan: Information Disclosure
Information disclosure plays a crucial role in corporate finance and accounting research. Proper information disclosure can help to reduce market uncertainty, increase company value, and assist investors in making wiser decisions. In Guandan, information disclosure is reflected in the rounds of card plays. Players not only need to show the cards they play but also need to let teammates and opponents understand the type and strength of the remaining cards in their hand through their play strategies, thereby influencing their subsequent strategic choices. When players have strong cards or need close cooperation from teammates, they will try to send clearer signals to reduce misunderstandings; conversely, when the card strength is insufficient or the situation is unfavorable, they may adopt some confusing strategies to interfere with the opponents’ judgments.
In business practice, companies involved in innovation and intellectual property can actively protect their technical achievements to clearly show their R&D strength to the market, similar to the use of strong cards to secure an advantage in Guandan. Conversely, when facing a crisis or adverse public opinion, companies may choose more conservative or ambiguous information disclosure strategies to mitigate the impact of negative information on brand reputation. Such practices can control the flow of news while looking for ways to solve problems or make strategic adjustments.
The Economics of Guandan: Nash Equilibrium
The information transfer strategy in Guandan might feel quite abstract. Considering all plays are public and eliminating the possibility of illicit communication, the information transmitted appears to be open and consistent. However, in reality, different equilibrium strategies, such as mixed-strategy equilibrium or separating equilibrium, can be chosen to create an advantage. In separating equilibrium, the behavior of the sender of information is recognized by the receiver; whereas, in mixed-strategy equilibrium, different types of senders may choose the same strategy, preventing the receiver from judging the sender’s type based solely on behavior.
Let’s take the endgame of a game of “Guan Dan” as an example, assuming you’re left with a straight and a single card in your hand. The typical strategy is to play the straight first and then the single card, facilitating cooperation from your teammate when only the single card remains. Even though your opponents can also observe this information, it is crucial for your teammate to understand the cards in your hand at critical moments for improving the win rate. It not only simplifies the complexity of the game but also enhances the overall performance of the team by reducing asymmetry in information.
In the card game, rational players tend to adopt different strategies based on the strength of their own cards and the potential hands of opponents on the field. When in control, reducing information asymmetry by revealing your own hand can let other players know, thus locking in victory. For example, after playing a straight, being left with a single card essentially makes one’s needs public, thereby guiding the game’s progress in one’s favor.
However, when at a disadvantage, i.e., when the control is in the opponent’s hands, it is appropriate to adopt a “mixed strategy” to maintain uncertainty in information, making it difficult for the opponent to accurately judge your hand. This caution on their part when formulating strategies increases the chances of their making a mistake. Such uncertainty provides the disadvantaged party with an opportunity to turn the tables.
In Guan Dan, complementary tactics and signaling are essential. When overall card strength is weak, players holding powerful cards like bombs can turn the tide at critical moments, aiding their teammates in victory. This tactic focuses not only on the individual’s immediate card strength but also takes into account the team’s long-term goals.
Through the complementarity of strategies, the team’s overall strength is greatly enhanced, achieving an effect in cooperative gaming where 1+1 is greater than 2. For example, when a player does not hold a particularly strong hand, they may use their only bomb to create an opportunity to lead, thereby earning a better position for their teammate to play.
In real life, this principle is equally applicable in multiple scenarios, such as cooperation in the construction and engineering industries. Companies with varying expertise join forces, combining their strengths to bid on large-scale projects, thus increasing their chances of winning contracts.
Unlike Texas Hold’em, the outcome in Guan Dan is not determined by a single game but is assessed over long-term play. If the shuffle is fair, luck becomes a random factor. In this context, the outcome often depends on evenly matched hands in which both parties have a chance to win.
In game matches, players must rely on strategic choices, psychological play, information usage, and team collaboration to control the game’s situation. Considering attention and card counting are both valuable but limited resources, deciding where to focus your energy becomes crucial; strategically, we should direct our energy to games of medium difficulty to optimize the use of resources.
In a single hand of cards, the distribution of hand resources is equally important. Players need to strategically decide when to play which card to maximize the efficiency of their hand, such as choosing to use smaller card combinations at the beginning of the game to save larger, more strategically valuable cards for later. Further, there are similarities between Chinese card game Guandan and Texas Hold’em at their core, both involving risk assessment and strategic choices.
Players need to assess the risk associated with their hand, considering the possibility of being overpowered by opponents, and to predict the potential rewards, that is, evaluating the benefits that could come with successfully taking control of the game’s flow. Similar to Texas Hold’em, one must weigh the expected outcomes and risks of each decision to determine the best strategy.
Drawing from the field of financial investment, investors need to decide how to allocate different assets within their portfolio, aiming at maximizing expected returns while also controlling risk levels. This involves choosing and weighting assets, which parallels strategizing in Guandan when deciding when to play different cards to increase the chances of winning. Investors also need to rationally evaluate the expected returns and risks of various assets to achieve an optimal risk-adjusted return.
Guandan, which seems like a simple card game on the surface, actually contains profound strategic and economic wisdom. It’s not just a contest of intelligence and strategy, but also an interesting platform for a deeper understanding and practice of economic principles. It integrates economic concepts such as information disclosure, resource management, and game theory equilibrium, offering us a scenario to dabble in the complexities of economics while being entertained.
