Thinking Strategically: Game Theory and Business Strategy

  • 7-weeks
  • 1.5 credits
  • Prerequisite: MBA Core

Good strategic thinking is both an art and a science. This course will focus on the science of strategic thinking. We will examine the science of strategic thinking using the tools of game theory, auction theory, and the mechanism design. The student will become familiar with the idea of placing himself or herself in his or her rival’s shoes in order to gain the upper hand in bargaining and reduce the risk associated with business ventures whenever possible.

We will begin by reviewing some of the basic principles of game theory as a foundation for strategic thinking. We will then apply this thinking to the business situations one is likely to encounter. Examples include realization of gains from cooperation, the transfer of risk to realize efficient production, signaling information indirectly where it is cost reducing, and the avoidance of overbidding in a sealed bid auction.

  • Review of Nash equilibria, dominant strategy, the Prisoner's Dilemma
  • Realizing gains from cooperation
  • Game trees
  • Risk and uncertainty
  • Using information strategically
  • Negotiating and bargaining power
  • Mechanism design
  • Auction theory

The text for the business course is The Art of Strategy by Avinash Dixit and Barry Naleuff.

Kelley School of Business

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