15.025
Game Theory for Strategic Advantage
Develops and applies principles of game theory relevant to managers' strategic decisions. Topics include how to reason about strategies and opponents; strategic commitment and negotiations; reputation and seemingly irrational actions; bidding in auctions; and the design of auctions, contests and markets. Applications to a variety of business decisions that arise in different industries, both within and outside the firm. Meets with 15.0251 when offered concurrently. Expectations and evaluation criteria differ for students taking graduate version; consult syllabus or instructor for specific details.
Spring 2015
Topics
- Introduction
- Rationality
- Nash Equilibrium
- (Un)predictable Outcomes
- Application: Strategic Trade Policy
- Designing Games and Influencing Outcomes
- Backward Induction
- Bargaining
- Wars of Attrition
- Team Presentations: Project Proposals
- Dynamic Price Competition
- Introduction to Repeated Interaction
- Long-run Relationships
- Application: Tacit Coordination
- Games with Asymmetric Information
- Introduction to Auctions
- Online Auctions
- Designing Auctions and Other Markets
- Costly Signaling vs. Cheap Talk
- Credibility and Reputation
- Application: Cold War Politics
- Team Project Presentations
- Team Project Presentations (cont.)
Readings
- [DSR] = Dixit, Avinash, Susan Skeath, and David Reiley. Games of Strategy . 3rd ed. W. W. Norton & Company, 2009. ISBN: 9780393931129.
- Smith, Raymond. “Business as a War Game: A Report from the Battlefront.” Fortune 134, no. 6 (1996): 190–92.
- [DSR] Chapter 1: Introduction.
- Brandenburger, and Nalebuff. Chapter 3 in Co-opetition . Doubleday Business, 1996. ISBN: 9780385479493.
- [DSR] Chapters 2: Basics, 4–4.4: Dominance, Best response, 11.1: Prisoners’ Dilemma, and 11.6: Experimental Evidence.
- SES #: 3 · TOPICS: Nash Equilibrium · READINGS: [DSR] Chapters 4.7: Multiple Equilibria, 5.3: Nash Equilibrium, and 5.4: Rationalizability.
- SES #: 4 · TOPICS: (Un)predictable Outcomes · READINGS: [DSR] Chapter 7: Mixed Strategies, skip Sections 7.2C and 7.5A.
- Chevalier, Judith. “When it can be Good to Burn your Boats,” Financial Times , October 25, 1999, p. 12.
- [DSR] Chapter 10: Strategic Moves.
- Chevalier, Judith. “The Pros and Cons of Entering a Market Surveys Edition,” Financial Times , November 1, 1999, p. 5.
- [DSR] Chapter 3: Sequential Moves.
- Brandenburger, and Nalebuff. Chapter 4 in Co-opetition . Doubleday Business, 1996, pp. 71–91. ISBN: 9780385479493.
- [DSR] Chapter 18: Bargaining.
- SES #: 10 · TOPICS: Team Presentations: Project Proposals · READINGS: No readings.
- SES #: 11 · TOPICS: Dynamic Price Competition · READINGS: Brandenburger, and Nalebuff. Chapter 5 in Co-opetition . Doubleday Business, 1996, pp. 131–45. ISBN: 9780385479493.
- Garicano, Luis, and Robert Gertner. “The Dynamics of Price Competition,” Financial Times , October 18, 1999, p. 2.
- [DSR] Chapter 11: Prisoners’ Dilemma and Repeated Games.
- SES #: 15 · TOPICS: Games with Asymmetric Information · READINGS: [DSR] Chapters 9.1–2: Uncertainty and Information.
- SES #: 16 · TOPICS: Introduction to Auctions · READINGS: [DSR] Chapter 17: Auctions.
- Angwin, Julia. “The Web’s New Gold Mine: Your Secrets,” Wall Street Journal , July 30, 2010.
- SES #: 19 · TOPICS: Costly Signaling vs. Cheap Talk · READINGS: [DSR] Chapters 9.3–6: Cheap Talk & Signaling.
- SES #: 20 · TOPICS: Credibility and Reputation · READINGS: Kreps, David. Chapter 23 in Microeconomics for Managers . W. W. Norton & Company, 2004, pp. 556–73. ISBN: 9780393976786.
- Schelling, Thomas. Chapters 7 and 8 in Strategy of Conflict . Oxford University Press, 1963. ISBN: 9780195002492.
- Dixit, Avinash K., and Susan Skeath. Games of Strategy . W. W. Norton & Company, 1999. ISBN: 9780393974218.
- SES #: 22 · TOPICS: Team Project Presentations · READINGS: No readings.
- SES #: 23 · TOPICS: Team Project Presentations (cont.) · READINGS: Takeaways from team projects and in-class games.
- Dixit, Avinash, Susan Skeath, and David Reiley. Games of Strategy . 3rd ed. W. W. Norton & Company, 2009. ISBN: 9780393931129.
Prerequisites & course information
Subject meets with 15.0251 Prereq: 14.01 , 15.010 , 15.011 , 15.024 , or permission of instructor G (Spring) 3-0-6 units Credit cannot also be received for 15.741
Sources
- Course catalogue ↗2026–2027
- MIT OpenCourseWare ↗Spring 2015
- MIT OCW calendar ↗
- MIT OCW readings ↗
- MIT OCW syllabus ↗
- Historical MIT OpenCourseWare offering. Named reading entries and schedule topics are automatically extracted from the linked source pages.