Business Strategy & Management

Business Strategy with Game Theory

A problem of fundamental importance for managers is how to make optimal decisions in strategic situations. Participants will learn some of the most important tools of game theory, as well as some important managerial economics applications of those tools to the analysis of real-world strategic situations.

Game theory suggests that we look for a so-called Nash equilibrium of the game - a powerful tool that is extremely useful in the analysis of strategic interactions.

Course Outlines

The first class of strategic situations that we analyze consists of those situations in which the parties involved make decisions only once and simultaneously. The analysis of this part allows us to shed light on the important managerial problem of strategic pricing.

We then consider the analysis of strategic situations in which parties interact repeatedly over time. The main insights of this section illustrate the value of building and maintaining a good reputation.

Finally, we will study strategic situations that are sequential in nature, in which some parties make their decisions before other parties. We analyze how firms with market power can deter potential entrants from entering an industry.

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