BUSM 752

The main learning objective of this course is to develop your skill in strategic thinking in business management. The field of game theory provides a useful framework for studying decision-making in strategic (or interactive) situations, i.e., in situations where your payoff depends not only on your own actions but also on the actions of other players. If Economics is one of the main languages of business management, then, Game Theory is one of the two major dialects of Economics (the other being Statistics). Indeed, it is hard to understand the major economic issues of our times without some knowledge of game theory. In this course, we first introduce the basic framework of game theory and then apply it various situations arising in business strategy and in business organization. Specifically, we consider the following issues in business strategy: price and capacity competition; strategic product differentiation; tacit collusion; market entry, strategic deterrence and accommodation; and signaling product quality via warranties. In business organization, we consider: incentives and risk-sharing in various organizational forms (partnerships, hierarchies, teams, franchises); incentives in vertically related markets and supply chains; incentives in capital structure and in corporate governance. The technical concepts covered include: equilibrium of static and dynamic games, strategic commitment and credibility, repeated games and reputation, asymmetric information (adverse selection and moral hazard), signaling and screening, and the principal-agent framework.