040038 UK Strategic thinking in practice (BA) (2015S)

Motivation:

Everyone would agree that thinking strategically is important. Everyone knows that it is
essential to lead a business. And economics and game theory have a lot to say about this
subject! This course will be particularly useful to those who consider starting their own
business and take important managerial decisions to optimize their business's performance. Economics analyzes your future business's place in the world. Who does your business interact with? How does it interact with these different parties? When is it desirable to cooperate and when does your business need to compete? How can your business best place itself to profit from these everyday interactions? Game theory, particularly over the past 40 years, has developed a variety of new tools that can aid decision-makers. It has been used by economists to consider alternative business strategies, including their strengths and weaknesses, to study the likely outcomes of day-to-day interactions and to formulate processes to ensure the best possible results. This course will focus on these recent advances in economic theory and practice. It will provide an integrated framework to deal with decision-making, competition, contracting and incentives, -- subjects that cover key economic principles and that are particularly
valuable for business.

Content:

The course will be split into two parts. The first part is a series of lectures on game-
theoretic foundations of core economic principles and phenomena. It aims at providing an
integrated framework to deal with decision-making, competition, contracting
and incentives. There will be a lot of simple stylized examples and real-world situations,
that we will discuss in the context of each specific topic of the course. The second part is presentations by students of their projects (see more details below).

Course Outline

1. Introduction and overview of the course. Some simple games: competition, coordination, and guessing.

2. Individual and strategic decision-making.

(Framing decisions, identifying player roles, common decision-making pitfalls; sequential, simultaneous and repeated games; examples and real-life situations.)

3. Negotiations, bargaining.

(Ultimatum game, wage and price bargaining, Rubinstein bargaining model, sources of bargaining power, alternative opportunities and cos of delay, negotiations under uncertainty, screening and signalling in different markets)