Game Theory

This course provides a way to understand the behavior of individuals and organizations in situations where their actions have a strategic impact on each other. As players can be individuals, organizations, or even countries, this course covers a broad range of strategic settings. As an interdisciplinary tool, game theory is used in a wide range of fields, including economics, political science, psychology, and sociology. Game theory is applied to inform decisions in situations such as price wars between companies, international relations, or even evolutionary biology. In this course students will learn how strategic players map strategies with the payoffs associated with each possible outcome, and how to best respond to the decisions of other players. Strategies refer to the actions that players can take, and payoffs represent the rewards or consequences that players obtain based on their actions and the actions of others. Game theory models are useful not only to analyze the strategic interaction of players, but to predict the outcome of games. Even when most predictions assume that each player acts rationally, meaning that they choose the strategy that maximizes their payoff, we will explicitly consider deviations from this assumption in the course. The course covers both fundamental concepts and applications of game theory. Examples of applications studied in the course include cooperation (like in a social dilemma or a public good game), coordination (as in the weakest link or minimum effort game), and conflict (as in contests and tournaments). These strategic settings will be used to understand how human behavior aligns with the principles and predictions of game theory. The course will provide answers to questions like the following: Why do individuals cooperate with strangers they are never going to meet again? Why do organizations fail to effectively use incentives to coordinate individuals and teams? Why is the sophistication of counterparts so difficult to predict? Why are resources systematically destroyed in wars, and inter-group conflict easily reignites despite its huge cost? The course is composed of a series of self-content modules addressing these questions with examples and cases. Game theory and behavioral science concepts and tools will be explained from scratch: no pre-existing knowledge is required. Permits offered to non-MBDS students if space is available.