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15.040

Game Theory for Managers

Graduate · Historical course

Spring 2004

Topics

  • Introduction
  • Rationality?
  • Equilibrium I
  • Equilibrium II
  • Commitment
  • Strategic Substitutes and Strategic Complements
  • Application: Entering a Market
  • Application: Brinksmanship
  • Auctions
  • Uncertainty and Information
  • Reputation and Strategic Irrationality

Readings

  • Dixit, Avinash K., and Susan Skeath. Games of Strategy . New York, NY: W. W. Norton & Company, 1999. ISBN: 0393974219.
    Listed reading
  • In the list of readings below, D&S = Dixit, Avinash K., and Susan Skeath. Games of Strategy . New York, NY: W. W. Norton & Company, 1999. ISBN: 0393974219.
    Listed reading
  • All students should become comfortable with material assigned in the textbook prior to each class. Students with less background will need to spend more time on this. Non-textbook readings that are most important to prepare for lecture are denoted with (*) or (**). (All readings are very helpful for getting as much as possible from the lecture.)
    Listed reading
  • LEC #: 1 · TOPICS: Introduction · READINGS: (*) Smith, Raymond. “Business as a War Game: A Report from the Battlefront.” Fortune, September 1996, 190-2.
    Reading assignment
  • Brandenburger, Adam, and Vijay Krishna. “The Gray Area: Common Sense 0, Strategic Reasoning 6.” Harvard Business Review 90, no. 4: 200-201.
    Listed reading
  • D&S. Chapter 1.
    Listed reading
  • LEC #: 2 · TOPICS: Rationality? · READINGS: Hirshleifer, David. “The Blind Leading the Blind: Social Influence, Fads, and Informational Cascades.” Chapter 12 in The New Economics of Human Behavior. Edited by Mariano Tomassi, and Kathryn Ierulli. Cambridge, UK: Cambridge University Press, 1995. ISBN: 0521479495.
    Reading assignment
  • Lowenstein, Roger. “Exuberance Is Rational.” The New York Times Magazine , 11 February 2001.
    Listed reading
  • (*) Buffett, Warren. “The Billionaire’s Buyout Plan.” The New York Times , 10 September 2000.
    Listed reading
  • D&S. Chapter 2, and 4 - 4.6.
    Listed reading
  • LEC #: 3 · TOPICS: Equilibrium I · READINGS: Hobson, Katherine. “The Malls Get Decked: Retailers Minding Too Many Stores.” The Street.com , 22 November 2000. Available at the Web site of The Street.com . ↗
    Reading assignment
  • (*) Peterson, Ivars. “Mating Games and Lizards.” Mathematical Association of America , 15 April 1996, (accessed July 12, 2004). ↗
    Listed reading
  • Glen, Orie. “Koufax Kicks.” SportsJones Magazine, 21 July 1998.
    Listed reading
  • D&S. Chapter 4.10 - 4.12, 5 - 5.4, 8.6, 10.3 - 10.4.
    Listed reading
  • LEC #: 4 · TOPICS: Equilibrium II · READINGS: Garicano, Luis. “Game Theory: How to Make It Pay.” Financial Times , 11 October 1999, 2.
    Reading assignment
  • (*) Garicano, Luis, and Robert Gertner. “The Dynamics of Price Competition.” Financial Times , 18 October 1999, 2.
    Listed reading
  • D&S. Chapter 3 - 3.7.
    Listed reading
  • LEC #: 5 · TOPICS: Commitment · READINGS: (*) Chevalier, Judith. “When It Can Be Good to Burn Your Boats.” Financial Times , 25 October 1999, 12.
    Reading assignment
  • Lieberman, Marvin B., and David B. Montgomery. “First-Mover Advantages.” Strategic Management Journal 9 (1988): 41-58.
    Listed reading
  • Schelling, Thomas. Strategy of Conflict. Cambridge, MA: Harvard University Press, 1963, chapter 10. ISBN: 0674840305.
    Listed reading
  • D&S. Chapter 9.
    Listed reading
  • LEC #: 6 · TOPICS: Strategic Substitutes and Strategic Complements · READINGS: (**) Lecture Note on Strategic Substitutes and Strategic Complements.
    Reading assignment
  • LEC #: 7 · TOPICS: Application: Entering a Market · READINGS: (**) Rivkin, Jan W. “Dogfight over Europe: RyanAir (A).” Boston, MA: Harvard Business School, 2000, Case No. 9-700-115.
    Reading assignment
  • Chevalier, Judith. “The Pros and Cons of Entering a Market.” Financial Times , 1 November 1999, 8-10.
    Listed reading
  • LEC #: 8 · TOPICS: Application: Brinksmanship · READINGS: Schelling, Thomas. Strategy of Conflict. Cambridge, MA: Harvard University Press, 1963, chapters 7 and 8.
    Reading assignment
  • D&S. Chapter 13.
    Listed reading
  • LEC #: 9 · TOPICS: Auctions · READINGS: (*) Michaels, Daniel. “Dogfight: In the Secret World of Airplane Deals, One Battle Up Close - Boeing, Airbus Vied to Meet Cutthroat Terms of Iberia.” The Wall Street Journal , 10 March 2003.
    Reading assignment
  • McMillan, John. “Selling Spectrum Rights.” Journal of Economic Perspectives 8 (Summer 1994): 145-62.
    Listed reading
  • D&S. Chapter 15.
    Listed reading
  • LEC #: 10 · TOPICS: Uncertainty and Information · READINGS: Loughran, Tim, and Jay Ritter. “The New Issues Puzzle.” Journal of Finance 50, no. 1 (1995): 23-51.
    Reading assignment
  • Easterbrook, Frank. “Two Agency-Cost Explanations of Dividends.” American Economic Review 74, no. 4 (1984): 650-9.
    Listed reading
  • D&S. Chapter 12.
    Listed reading
  • LEC #: 11 · TOPICS: Reputation and Strategic Irrationality · READINGS: (*) Kreps, David M. Microeconomics for Managers. W.W. Norton & Company, 2004, chapter 23, pp. 556-73. ISBN: 0393976793.
    Reading assignment
  • D&S. Chapter 8.1 - 8.5.
    Listed reading
Sources