Seminar: Thinking Strategically: Psychology, Economics, and Experiments

1. The degree of conflict: Whenever a group of individuals interacts in a particular situation, individual preferences of these group members may be in conflict. In the tennis game, for example, the players' interests are strictly opposed. When meeting a friend, on the other hand, there is no conflict of interest. In the first case, we speak of games of pure conflict, in the latter one about games of pure cooperation. Between them are games of mixed interests.
2. The degree of behavioral uncertainty: According to this criterion, players can either be determined, unpredictable or ambiguous in their behaviour. An example for the first case arises in team games when team members have mutual interests. The tennis game is an example where players want to be unpredictable in their play. And players are ambiguous in their behaviour if there are several possible ways how they could optimally behave.

Given these two dimensions, we discuss the following classes of games in our course: Prisoners’ Dilemma Games, where interests are mixed and players’ behaviour is determined; Dis-coordination Games, where players don’t want to coordinate their behaviour so that unpredictability is important; Zero-sum Games, where interests are strictly opposite so that players either win all or lose everything; Battle-of-Sexes Games, where players have mixed interests and behaviour is ambiguous; and Coordination and Anti-coordination Games, where players have common interests for either getting together or stepping aside and their behaviour is ambiguous.

• Learning the basic principles of game theory will help you improve your own strategic thinking and your understanding why and how people make decisions
• Learning to create value through team work will be useful for next group works and cases
• Learning to apply game theoretical basics will serve as foundation for advanced courses
• Learning to analyze and apply a theoretical paper will help you to relate theory to praxis
• Learning a scientific method will be helpful for your bachelor and master thesis
• Learning to speak in front of others will be useful for your university and business career

Experiments

Presentation

• Experiment: 35%
• Presentation: 35%
• In-class assignments: 30%
• Class participation: Tiebreaker