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, international relations, evolutionary biology, business strategy, and computer science. Studying game theory can help shed light on price wars between companies, nuclear deterrence between countries, or competition for mating partners among species members. In this course, we will examine the fundamental tools and instruments of Game Theory and put into practice the tools to examine and delve deeper into some applied topics of game theory.   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, as well as to understand where the theoretic predictions fall short. The course will provide answers to questions like the following: Why do individuals cooperate with strangers? Why do organizations often fail to effectively use incentives to coordinate individuals and teams? Why is the sophistication of counterparts so difficult to predict? Why do winning bidders often end up losing money by winning an auction? 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. Permits offered to non-MBDS students if space is available.