Description
Lexington Books Analyzing Strategic Behavior in Business and Economics A Game Theory Primer 2014 Edition by Thomas J. Webster
This textbook is an introduction to game theory, which is the systematic analysis of decision-making in interactive settings. Game theory can be of great value to business managers. The ability to correctly anticipate countermove by rival firms in competitive and cooperative settings enables managers to make more effective marketing, advertising, pricing, and other business decisions to optimally achieve the firm's objectives. Game theory does not always accurately predict how rivals will act in strategic situations, but does identify a decision maker's best response to situations involving move and countermove. As Nobel Prize winner Thomas Shelling noted: "We may wish to understand how participants actually do conduct themselves in conflict situations; an understanding of the 'correct' play may give us a bench mark for the study of actual behavior." The concise and axiomatic approach to the material presented in this textbook is easily accessible to students with a background in the principles of microeconomics and college mathematics. The selection and organizations of topics makes the textbook appropriate for use in a wide range of curricula by students with different backgrounds. Table of contents :- PREFACE1 INTRODUCTION TO GAME THEORYIntroductionStrategic behaviorShort history of game theoryLexicon of game theoryRational versus actual behaviorPractice ExercisesPART I: STATIC GAMES WITH COMPLETE INFORMATION2 COALITION GAMESIntroductionPrisoner's dilemmaThe extensive formThe normal formNash equilibriumShortcut for finding-pure strategy Nash equilibriaDeterminants of business collusionNumber of firms with similar interestsFirm size relative to the industryVisibilityPractice Exercises3 STRATEGIC MOVES AND DETERRING DEFECTIONIntroductionStrategic movesDeterring defectionContractsReputationCutting off communicationsPreventing retreatBrinksmanshipIncrementalismTeamworkAgentsPractice exercises4 COMPETITION GAMESIntroductionStrictly-dominant strategiesWeakly-dominant strategiesIterated elimination of dominated strategiesThree-player gamesNon-dominant strategiesMaximin (secure) strategyPractice exercises5 COORDINATION GAMESIntroductionBattle-of-the-sexes gameFocal-point equilibriumDeveloping a theory of focal-point equilibriaFramingPractice Exercises6 INFINITELY-REPEATED GAMESIntroductionCoalitionsRepeated static gamesTrigger strategies Evaluating payoffs in infinitely-repeated gamesPractice Exercises7 FINITELY-REPEATED GAMESIntroductionFinitely-repeated games with a certain endEnd-of-game problemFinitely-repeated games with an uncertain endA word of cautionConcluding remarksPractice Exercises8 EVOLUTION GAMESIntroductionEvolutionary game theoryReproductive successEvolutionary equilibriumNetworksPositive feedback effectsNetwork gameImplicationsPractice Exercises9 TIT-FOR-TATIntroductionTit-for-tatEnd-of-game problemPractice Exercises10 MIXING PURE STRATEGIESIntroductionZero-sum gamesMatching penniesMinimax theoremMixed strategiesOptimal mixing rulesCalculating optimal mixing rulesWhen to use optimal mixing rulesHow to use optimal mixing rulesBluffingPractice Exercises11. CONTINUOUS STRATEGIESIntroductionContinuous strategiesBest-response (reaction) functionsTragedy of the commonsShifting best-response functionsPractice Exercises12. STATIC OLIGOPOLY GAMESIntroductionCournot modelAdvertising in a Cournot settingBertrand modelBertrand paradoxPractice Exercises13. STRATEGIC TRADE POLICYIntroductionDiscrete pure strategiesContinuous pure strategiesNational welfareIntraindustry tradeImperfect competitionIntraindustry coalitionsExport subsidiesReciprocityPractice Exercises14. PRODUCT DIFFERENTIATIONIntroductionHorizontal differentiationVertical differentiationLocationProduct differencesPractice exercises15. STRATEGIC COMPLEMENTSIntroductionDouble marginalizationPractice exercisesPART II: DYNAMIC GAMES WITH COMPLETE AND PERFECT INFORMATION16. GAME TREESIntroductionGame treesSubgame perfectionBackward inductionCredible threatsFirst-mover advantageEntry deterrencePractice Exercises17. A DYNAMIC OLIGOPOLY GAMEIntroductionStackelberg modelPractice Exercises18. BARGAININGIntroductionThe bargaining problemUltimatum bargainingUltimatum paradoxNash bargainingRubenstein bargainingLast-mover's advantageSymmetric impatienceAsymmetric impatiencePractice ExercisesPART III: GAMES WITH INCOMPLETE INFORMATION19. DECISION MAKING AND UNCERTAINTYIntroductionRisk and uncertaintyStatic games with uncertain payoffsStatic games in extensive formDynamic games with uncertain payoffsAttitudes towards riskRisk aversionUnderstanding risk-averse behaviorPractice Exercises20. ADVERSE SELECTIONIntroductionThe market for lemonsPractice Exercises21. INCENTIVE CONTRACTSIntroductionPrincipal-agent problemIncentive contractsPrincipal-agent problem with moral hazardPractice ExercisesPART IV: GAMES WITH IMPERFECT INFORMATION 22. INFORMATION SETSIntroductionInformation setsBayesian updatingPractice Exercises23. AUCTIONSIntroductionTypes of auctionsInformation structuresComplete-information auctionsSealed-bid, first-price auctionSealed-bid, second-price auctionEnglish auctionDutch auctionExpected revenues from complete-information auctionsIncomplete-information auctions with independent private valuesSealed-bid, first-price auctionSealed-bid, second-price auctionEnglish auctionDutch auctionExpected revenues from incomplete-information auctions with independent private valuesIncomplete-information auctions with correlated value estimatesCommon-value auctions and the winner's curseIncomplete-information auctions and risk aversionPractice exercises24. SIGNALINGIntroductionSpence education gamePooling strategySeparating strategyCorporate investment gameMultiple subgame-perfect Bayesian equilibriaPractice Exercises25. SCREENINGIntroductionSelf-selectionSpence education game in reversePractice ExercisesAPPENDICESREFERENCES AND SUGGESTIONS FOR FURTHER READINGINDEX