Minor Game Theory for Managers

Samenvatting

Categorie
Broadening minor
Code
MINRSM003
Minor hoort bij de opleiding

Content

Week 1: Strategies and equilibrium
The ingredients of a non-cooperative game are delineated and illustrated with insights regarding bargaining, strategic delegation, and agenda control.

Week 2: Information structure, i.e. taking turns in the dark
Many strategic settings are interesting because a player knows something that other players do not observe. Information sets are introduced to capture informational differences between players and their impact on behavior is addressed.

Week 3: Incomplete information, i.e. I know something you don’t know
There are many settings in which people have some information only known to them. The player lacking the information experiences therefore uncertainty about the other player. One of the behavioral implications is that it may be attractive for players to create (endogenously) uncertainty about their course of action, i.e. a mixed strategy.

Week 4 and 5: Reaction functions and Strategy typology, i.e. structuring the market to your own interest
A strategy typology will be developed to cover strategic aspects of many topics in finance (equity participations, limited liability, deep pocket), marketing (product differentiation, advertising, compatibility, assortment), organization (delegation, royalties/licenses, most-favored-customer-clauses, contracts), technology (capacity, spillovers, dynamic economies of scale), and industry structure (fragmentation, dual structures, leadership).

Week 6: Contracts
Game theory is used to address the design of attractive incentive contracts.

Week 7: Business is war, and business is peace
To find a way of bringing together the two seemingly opposing perspectives of competition (‘Business is war’) and cooperation (‘Business is peace’), we turn to repeated games. Repeated game are applied to address cartel stability, the transaction platform eBay, and reputations.

Week 8: Beliefs and Perfect Bayesian Equilibrium, i.e. what you do tells me who you are
When players have private information and move sequentially, then players may learn the hidden information by the choices others make. Classic examples are the choice of education to signal ability and establishing a reputation by the choice of investment.

Week 9: Cooperative game theory
Cooperative game theory is a method to handle situations where the way in which players interact is unstructured. It highlights only the outcome of interactions. Various applications will be highlighted, such as power, cost allocation, coalitional formation, and matching mechanisms.

Week 10: Exam preparation

Learning objectives

This course will examine the basic ideas of game theory and apply them to all fields in management. Themes and patterns are identified that are common to situations in all fields of management (accounting, finance, marketing, organization, strategy, supply chains, technology), like capacity to think ahead, grasp how others think and behave, commitments, threats and promises, contract design, strategies of signalling, and the emergence of cooperation.

In this course, we aim to achieve therefore three goals:

1 Provide insight in strategic management situations, using a game theoretic perspective;

2 Improve your management thinking by using game theory;

3 Enable you to develop better general management strategies.

Special aspects

  • Specific characteristics: Concepts are developed incrementally to highlight their logic, while no mathematical skills are required beyond the high school level. There is no prior knowledge required.
  • Students from the entire Erasmus University Rotterdam, and elsewhere, are welcome.
  • Contact hours: 6
  • Self study hours: 34
  • All RSM minors have mandatory attendance.

Overview content per week

Week 1: Strategies and equilibrium
Week 2: Information structure, i.e. taking turns in the dark
Week 3: Incomplete information, i.e. I know something you don’t know
Week 4 and 5: Reaction functions and Strategy typology, i.e. structuring the market to your own interest
Week 6: Contracts
Week 7: Business is war, and business is peace
Week 8: Beliefs and Perfect Bayesian Equilibrium, i.e. what you do tells me who you are
Week 9: Cooperative game theory
Week 10: Exam preparation

Teaching materials

Watson, J., Strategy, an Introduction to Game Theory, Norton, 2013.

Examination

Method of examination
1 Team assignments (8) and presentation (1)
2 Written test (individual)

3 Paper (individual)
4 Participation (individual)

Composition final grade
Each of the four parts of the grade will be graded on a scale with 100 units. This determines the percentage of the maximum number of points that you can earn on each part.

1 Assignments (8) and presentation (1) (The maximum score on each them is 4. Total maximum: 9x4=36 points)
2 Written test (34 points)
3 Paper (30 points, consisting of 25% Intro and Literature review, 75% Final version)
4 Participation (18x2=36 points)

Final grade: (# points – 36)/10.

For example, if you earn 75 units on each assignment and the presentation, 80 units on the test, 80 units on the test, and 100 units on participation, then your grade is 7,8 because (9x3+27,2+24+36-36)/10=78,2/10.

Only the written test and the paper have a resit possibility. A resit of the paper will only be granted when the paper has a failing grade. The resit of the paper entails choosing a new topic for your paper and will result in a grade not exceeding 6.

Feedback
Written feedback by grading.

Contact information

Prof. dr. George Hendrikse
ghendrikse@rsm.nl
(010) 4088660
room: T10-56

Factsheet

Categorie
Broadening minor
Code
MINRSM003
Minor hoort bij de opleiding
Organisatie
Rotterdam School of Management, Erasmus University
Studiepunten (ECTS)
15
Voertaal
Engels
Locatie
Campus Woudestein, Rotterdam

Registration

Please read the application procedure for more information.