STRATEGIC DECISION MAKING AND GAME THEORY
ECO / MGMT 798
Winter 2008
Professor: Rafael A. Tenorio
Office: 6207 DePaul Center
Telephone: (312) 362-8309
Fax: (312) 362-5452
E-mail: rtenorio@condor.depaul.edu / rtenorio@depaul.edu
Web Page: http://fac.comtech.depaul.edu/rtenorio
Office hours: One hour prior to class, and by appointment. I will also do my best to answer any
e-mail messages I get as promptly as possible.
Course Goals and Description
The goal of this course is to introduce students to game-theoretic way of thinking and show its
usefulness in understanding various problems arising in business, economics, as well as many
other disciplines and every day life. The tools used in game theory are analytical in nature, and
hence the building blocks of the course will necessarily draw on analytics. The instructor’s job
will be to make these analytics accessible to students without using too much mathematics. Once
students grasp these tools, a variety of applications will be presented, discussed, and illustrated
using experiments. These applications will be mainly in the fields of business and economics, but
will often span to other areas like law, politics, biology, and ethics. In this way, students will get a
broad perspective of the multiple applications of game-theoretic reasoning.
Text and Materials
Games for Business and Economics, 2nd. Ed., Roy Gardner, Wiley, 2003.
Thinking Strategically, Avinash Dixit and Barry Nalebuff, Norton, 1991.
Lecture Notes, to be posted prior to every class.
Miscellaneous Readings, to be posted regularly.
Grading
The overall grade will be determined as follows:
Presentations and Class Participation (30%)
Assignments (20%)
Experiments (10%)
Paper (40%)
Notes

Each student will be responsible for one or two presentations, depending on (a) the length of
the paper to present, and (b) the total number of students.

Topics for presentations will be assigned on a volunteering, first, and random, second, basis.

Short (one-page) assignments will be distributed every week. These are due in the
Blackboard Digital Dropbox before class on the following week.

If possible and convenient, paper topics should be discussed with the instructor. Papers are
due via e-mail at the end of the business day on the date assigned by the instructor.

Experiments will be run regularly throughout the term. Experimental performance will be
evaluated based on the addition of individual payoffs across all experiments run during the
term. No make-ups will be given for missed experiments.

Absolutely
NO
“extra credit” assignments.
COURSE OUTLINE
Introduction
Gardner [G] Ch. 1-2; Dixit & Nalebuff [D&N] Ch. 1
Simultaneous Moves
Two-Person Games
G Ch. 3; D&N, Ch. 3; The Battle of the Sexes (Murnighan 1992, 139-155); Singled Out (Trandel
1999, 133-140); Nascar (Ronfeldt 2002)
Mixed Strategies
G Ch. 4; D&N Ch. 7; Tennis (D&N Ch. 7, 172-183; Walker and Wooders 1998); Soccer
(Palacios-Huerta 2003); Literature (Brams 1994, D&N 189-192)
N-Person Games
G Ch. 5; Environment (Riddley & Low 1993, Busch 1996); Social Dilemmas (Glance and
Huberman 1994); Local Commons (JEP Symposium 1993)
Sequential Moves
Backward Induction and Credibility
G Ch. 7; D&N Ch. 2, 5, & 6; Cuban Missile Crisis (Brams 1985, 116-128); Ultimatums (Thaler
1992, 21-35; Murnighan 1992, 103-121); Nuisance Suits (Rasmusen 1994)
Repeated Games
G Ch. 8; D&N Ch. 4 & 9; Corporate Culture (Kreps 1990; Cronqvist, Low and Nilsson 2007);
Trench Warfare (Axelrod, 1984)
Evolution
G Ch. 9; Cheating (Frank 1988, 56-63); Seeing Around Corners (Rauch 2002); Animals
(Maynard Smith 1982, Ch. 6-7)
Signaling and Screening
G. Ch. 10; Gifts (Camerer 1988; Kimeldorf and McCullough 2007); Lemons in Baseball,
Thoroughbred, and Used Car Markets (Lehn 1984, Chezum and Wimmer 1997, Genesove 1993)
Further Topics
Auctions
G Ch. 12; D&N Ch. 12 [parts]; Spectrum Rights (McMillan 1994, McAfee & McMillan 1996);
The Winner’s Curse (Thaler 1992, 50-78, Dyer & Kagel 1996)
Bargaining and Arbitration
G Ch. 13 & 14; D&N Ch. 8 & 11; Arbitration (Brams, Kilgour, & Merrill 1991); Unions (D&N,
286-295, Freeman 1986); International Trade Agreements (McMillan 1989, 1991, 1992); Theory
vs. Practice (Chaterjee 1996)
Market Games
G Ch. 6; Potential Competition (Gilbert 1989); Railroads and Steel Cartels (Porter 1983, Baker
1989)
Agency
G Ch. 11; D&N Ch. 12 [parts]; Executive Compensation (MCMillan 1991, 120-129, Milgrom &
Roberts 1992, 423-446); Insider Trading (Easterbrook, 1985); Science Policy (Guston 1996),
Efficiency Wages (Milgrom & Roberts 1992, 25-261); Security Design (Harris & Raviv 1995)