Analyzing Strategic Behavior in Business and Economics A Game Theory Primer
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Thomas J. Webster is a professor of economics in the Department of Finance and Economics of Pace University’s Lubin School of Business in New York City. Before joining the faculty at Pace University, Dr. Webster held positions as an international economist with the Central Intelligence Agency, the U.S. Department of Defense, Manufacturers Hanover Trust Company, and Continental Illinois National Bank and Trust Company. Dr. Webster has served as graduate and undergraduate finance program chair, and as faculty advisor to Beta Gamma Sigma, the international honor society for collegiate schools of business. He is the recipient of the Lubin School of Business Scholarly Research Award for Basic Scholarship, the Lubin School of Business Outstanding Faculty Service Award, the Pace University Award for Distinguished Service, and the Beta Gamma Sigma Commitment to Excellence Award. Dr. Webster received his BA from the School of International Service of American University, and his MA, MPhil, and PhD from the City University of New York.Business decisions are rarely made in a competitive vacuum. A manager’s ability to maximize a firm’s value on behalf of shareholders may be hamstrung by an inability to raise finance capital, disruption in the flow of critical raw materials, shortages of skilled labor, capacity constraints, labor unrest, insufficient warehouse space, more. Managers who are able to put themselves in to the shoes of rivals are more likely to successfully achieve the firm’s objectives than those who do not. This volume is an introduction to game theory, the systematic analysis of decision making in interactive settings. Game theory identifies a decision maker’s best response to situations involving move and counter move. Thomas J. Webster is professor of economics in the Department of Finance and Economics of Pace University’s Lubin School of Business in NYC.
Wonderpedia
Wrong incentive compatibility frameworks are at the root of the current global economic recession. Game theory is at the core of modern economic analysis, and Thomas J. Webster’s textbook is the first step to understand it. It is simple in exercises, yet deep in concepts.
- Augusto Schianchi, Universita Degli Studi di Parma,
Webster does a great job of relating different strands of game theory to business applications. The book helps managers understand how to anticipate and optimally react to their rivals’ actions.
- David J. Gabel, Queens College,
This is an excellent text, clearly written with practical end of chapter questions. It is perfect for teaching students who may not have a sophisticated mathematical background. It makes a major contribution in making game theory accessible to a broad audience, and is a pleasure to read.
- Joan Nix, Queens College,
PREFACE
1 INTRODUCTION TO GAME THEORY
Introduction
Strategic behavior
Short history of game theory
Lexicon of game theory
Rational versus actual behavior
Practice Exercises
PART I: STATIC GAMES WITH COMPLETE INFORMATION
2 COALITION GAMES
Introduction
Prisoner’s dilemma
The extensive form
The normal form
Nash equilibrium
Shortcut for finding-pure strategy Nash equilibria
Determinants of business collusion
Number of firms with similar interests
Firm size relative to the industry
Visibility
Practice Exercises
3 STRATEGIC MOVES AND DETERRING DEFECTION
Introduction
Strategic moves
Deterring defection
Contracts
Reputation
Cutting off communications
Preventing retreat
Brinksmanship
Incrementalism
Teamwork
Agents
Practice exercises
4 COMPETITION GAMES
Introduction
Strictly-dominant strategies
Weakly-dominant strategies
Iterated elimination of dominated strategies
Three-player games
Non-dominant strategies
Maximin (secure) strategy
Practice exercises
5 COORD