MBA 211

Game Theory

Fall 2015


Professor John Morgan                                            

665 Faculty Building                                           

510.642.2669                                                               Office hours: By appointment

Monday and Wednesday
11:00 AM  -12:30 PM


Game Theory Blog

Course Outline

Below is an outline of the course that roughly corresponds to each class session. It is important to emphasize that the outline is subject to change based on demand, timing differences, etc. Links will become live close to the time of each class.

Key: DN = Dixit and Nalebuff, C = Case reading from, M = McAdams, G= Gibbons

Avinash K. Dixit and Barry J. Nalebuff, The Art of Strategy: A Game Theorist's Guide to Success in Business and Life,  ISBN-10 0393337170

David McAdams, Game Changers, ISBN-10 0393239675

Gibbons, R. Game Theory for Applied Economists (optional text), ISBN-10 0691003955

1.      Course Overview (8/24/2015)

Reading: Course overview (slides), DN Ch. 1, M Introduction

Take aways: Overview of game theory; goals of the course; lens through which to view strategy

Team Sign Up Form


2.      Rights of First Refusal (8/26/2015)

Reading: NBA Free Agency (experiment) + NBA Details (mechanics of experiment), C Games of Strategy: An Introduction, pp. 1-5, M Ch. 1

Assignment: Problem set 1 (due before class 6).

Take aways: Fundamental principle of game theory: look forward, reason back; game theoretic versus "normal" options


3.      Look Forward, Reason Back (8/31/2015)

Reading: DN Ch. 2, Coors in the 1970s (caselet), Look forward, reason back (slides)

Take aways: Recipe for analyzing strategic situations


4.      Timing is Crucial (9/2/2015)

Reading: M: Game Theory Focus 1,  The Gaming of Pharmaceutical Patents (handout),  McCain-Schumer (experiment) , McCain-Schumer Results

Take aways: Timing in games; the strategy of (non)disclosure


5.      Timing in Games (9/9/2015)

Reading: DN Ch. 4, M Ch. 2 + GT Focus 2, G Ch. 1, C Games of Strategy: An Introduction, pp. 6-8, C Game Theory and Business Strategy, IGOUGO versus WEGO

Take aways: Nash equilibrium


6.      Archetypal Strategic Situations (9/14/2015)

Reading: Games with Simultaneous Moves (slides)

Assignment: Problem set 2 (due 9/28/2015)

Take Aways: Archetypal strategic situations with simultaneous moves; links between competitive strategy and game theory


7.      Spectrum Auctions (9/16/2015)

Reading: C Games of Strategy: An Introduction, pp. 8-12, Auctioning the Spectrum (experiment), Results

Take Aways: Dominant strategies, Vickrey auctions


8.      Prisoners Dilemmas and Free-Rider Problems (9/21/2015)

Reading: DN Ch. 3, pp. 64-71, Dominance (slides)

Take aways: Archetypal strategic situations with dominant strategies; "solving" social dilemmas


9.  OPEC (9/23/2015)

Reading: M Ch. 3, DN Ch. 6, OPEC (experiment),

Assignment: OPEC Strategy Memo (due before class 14)

Take aways: Leadership, strategy, and planning in dynamic environments


10.      Building Mental Models (9/28/2015)

Reading:  C Competitor Analysis: Anticipating Competitive Actions

Take aways: Competition framework, behavioral analysis, competitor analysis


11.  Tacit Coordination (9/30/2015)

Reading: DN Ch. 3, pp. 72-101, M Ch 4, Dynamic Games (slides)

Take aways: Using threats and promises to create cooperation, limits to cooperation


12.   Coordination in Practice: GE v Westinghouse (10/5/2015)

Reading:  M Ch. 5, C GE v Westinghouse

Take aways: Practical implementation of cooperation strategies


In preparing the case, please answer the following questions:

1.      Is the turbine business a good one to be in?

2.      What are the sources of competitive advantage for GE?


13.  Commitment in Practice: Browser Wars (10/7/2015)

Reading: C A Brief History of the Browser Wars, DN Ch. 7

Take aways: Practical implementation of commitment strategies


In preparing the case, please answer the following questions:


1.      Why did IE overtake Netscape in market share?

2.      Did bundling play a role? If so, how?

3.      Was this an effective strategy for Microsoft?


14.  Commitment and Coordination in Practice: OPEC Debrief (10/12/2015)

Reading: M. Ch 6, DN Ch. 13

Take aways: Practical leadership, strategy, and planning in dynamic environments

Prisoner's Dilemma Tournament (Experiment)


15.  Mid-semester presentations (10/14/2015)

Write-ups for mid-semester presentations are due 10/27.

Sample Mid Semester Projects from 2014


16.  Mid-semester presentations (10/19/2015)

Write-ups for mid-semester presentations are due 10/27.


17.  Guest Speaker: TBD (10/21/2015)


18.  Judo Strategies (10/26/2015)

Reading: Judo Economics (experiment), C Judo in Action

Take aways: Limited commitment as competitive advantage

Mid-Semester Writeups Due Today

Assignment: Problem Set 4 (due before class 22)


19.  Venture Capital Financing (10/28/2015)

Reading: DN Ch. 10, Venture Capital Financing (experiment)

Take aways: Structuring auctions to create/capture value, optimal bidding in auctions


20.  Auction Design (11/2/2015)

Reading: Auctions (slides), Kinked Bidding in First-Price Auctions

Take aways: Strategic equivalence, the revenue equivalence theorem


21.  Wars of Attrition (11/4/2015)

Reading: C Hold or Fold? The War of Attrition, C End-Game Strategies for Declining Industries, Wars of Attrition (slides), Wars of Attrition (notes)

Assignment: Problem Set 5 (due before class 26)

Take aways: Using the RET, game theory and exit strategies, recognizing wars of attrition


22.  Pricing for Profitability in Online Markets (11/9/2015)

Reading: Pricing on the Internet (experiment) (played in class), A Dashboard for Online Pricing (CMR Article), E-retail results

Take aways: Hit and run pricing, optimal pricing


23.  The Strategy of Uncertainty (11/16/2015)

Reading: DN Ch. 5, Mixed Strategies (slides)

Take aways: mixed strategy equilibrium, strategic uncertainty, exploiting tendencies, volunteer's dilemma


24.  Signaling in Action (11/18/2015)

Reading: DN Ch. 8, The Value of Education (experiment) (played in class)

Take aways: Credible signals, what makes a good signal, beliefs


25.  Signaling in Theory (11/23/2015)

Reading: Signaling (slides)

Take aways: Determining credible signals, assessing signals


26.  What Makes Markets Tip (11/30/2015)

Reading: Social Learning (slides), Reputation in Online Markets (CMR Article)

Take aways: Information cascades, reputational lock-in


27.  Final project presentations (12/2/2015)


28.  Final project presentations (12/7/2015)

Final Projects due week after last presentation.

Sample Final Projects from 2014


  Bonus Class (12/9/2015 Tentative)


Course Objectives


 This course is a survey of the main ideas and techniques of game-theoretic analysis related to bargaining, conflict, and negotiation.  As such, the course emphasizes the identification and analysis of archetypal strategic situations frequently occurring in bargaining situations.  The goals of the course to provide students with a foundation to:

(i)                  Apply game-theoretic analysis, both formally and intuitively, to negotiation and bargaining situations.

(ii)                Recognize and assess archetypal strategic situations in complicated negotiation settings.

(iii)               Feel comfortable in the process of negotiation.


The course has a strong experiential component. Students will repeatedly participate in a variety of strategic situations thereby developing the ability to translate their analyses into practice.


 A working knowledge of basic calculus and ease with algebraic manipulation are prerequisites of the course. Prior exposure to microeconomics is very helpful.


Course Requirements

The combination of attendance, participation, and problem sets count for 25% of the course grade.