Welcome to Game Theory Central!
Click here to download the Table of Contents and Chapter 7 on Asymmetric Information Free!
About the Book
Anticipate, then ACT!
Game Theory: Anticipating Reactions for Winning Actions is a short (135 pp), inexpensive, accessible introduction to Game Theory, the science of strategy. Designed to be highly readable, current, and relevant, this book makes a perfect companion to be used as a game theory module in microeconomics, business strategy, or MBA economics courses where textbooks often only have one or two chapters on strategy and information theory. It also provides an introduction to anyone wanting to learn the basics of strategic analysis.
This book is divided into two parts. Part 1 covers simultaneous and sequential "matrix" games in depth, discussing Nash Equilibria, dominant and dominated strategies, iterated dominance, subgame perfection, first and second mover advantages, and repeated games and cooperation.
The second part covers other types of games, including information games (moral hazard and adverse selection), business pricing and quantity setting games, and location games with many applications to real world settings. These settings include hiring and rewarding employees, working in teams, and customer relations.
Resources to For Learning Game Theory
On this site, you will find YouTube videos, printable PDFs with the game matrices and trees from the book, and other resources to supplement the information from the book.
Dr. Burkey also has almost 300 YouTube videos on Economics, Statistics, GIS, Computing, and Econometrics at www.burkeyacademy.com.
Chapter 1 Resources
More information about the "Friends" Episode mentioned in the Chapter: Why "Perfect Information" means that everyone knows, and everyone knows they know, and ... to infinity!
Chapter 2 Resources
Video: Game Theory Video A Simultaneous Games and Nash Equilibria
Video: Game Theory Video B Simultaneous Games and Nash Equilibria and Dominant Strategies
Video: How to Calculate Mixed Strategy Nash Equilibria! (Not for the faint of heart)
Chapter 3 Resources
Chapter 4 Resources
Video: Evolutionary Stable Strategies. In Chapter 4 I discuss several refinements to Dominant Strategies and Nash Equilibria, including iterated and weak dominance, a sort of trembling hand refinement, and focal points. Here I add a new topic discussed in Biology.
Chapter 5 Resources
Video: Game Theory C Sequential Games: A quick review of simultaneous games, and a first look at sequential games, backward induction, and subgame perfect equilibria.
Video: Game Theory D Dating Game: Another example of solving a simultaneous game and its sequential counterpart.
About Game Theory
From its beginnings in the early 1900s, game theory has been a very mathematical, technical subject. However, it also provides valuable, everyday lessons that are important for managers and executives to understand. Current books and textbooks are mostly highly mathematical, and almost all are very long. This primer will deliver a focused and precise, but non-mathematical overview of topics in game theory that are directly relevant to managing an organization. Game theory is the science of action and reaction. While most standard economic analyses embody the science of making an optimal choice, this kind of analysis is largely undertaken in a vacuum. For example, every managerial economics textbook examines profit maximization for a firm to choose the optimal price and quantity given its cost structure and demand of its customers. However, when a firm raises or lowers its price, this is rarely the end of the story-competitors are likely to react by changing their prices and quantities as well. Game Theory adds in this extra layer of realism.
This book will teach people to think ahead and foresee possible reactions to their actions. We will examine games played against one's competitors, against one's employees, against oneself, bargaining situations, and how to get the most out of cooperative teams.
Chapter 6 Resources
Links to some papers about Cooperation:
Chapter 7 Resources
Eric Rasmussen's TextBook: Games and Information
Article about Scammer's Emails in The Economist: "Blatancy and Latency"
Chapter 8 Resources
Life Table Link: CDC US Life Tables, 2007.
On Risk Homeostasis: Wilde, G. Target risk.
On De-shopping: “Return to vendor: A dress on loan”
About Online Price discrimination: “Caveat emptor.com”
Chapter 9 Resources
Chapter 10 Resources
An interesting blog post about the Hotelling location game. Note: Of course, I disagree about his conclusion about gas stations clustering for this reason. I think that zoning, the location of highway exits, and the fact that his map is of 1,000 square miles and millions of people explains the perceived clustering better.
Chapter 11 Resources
Chapter 12 Resources