Programmes

Competitive Strategy and Game Theory

  • Summer schools
  • Department of Management
  • Application code SS-MG205
  • Starting 2020
  • Short course: Open
  • Location: Houghton Street, London

UPDATE: Due to the global COVID-19 pandemic we will no longer be offering this course in summer 2020. Please check our latest news on this situation here.  

You can still register your interest in this course for 2021 using the ‘Sign up’ button to the right.  

This course is an introduction to strategic thinking applied to managerial situations. By drawing simultaneously on the language and tools of game theory, economics and management, it develops a coherent and logical framework that helps analyse real-life business situations.

Following an introduction to game theory, oligopoly theory, and the psychology of intuitive decision-making, the course examines concrete business situations, including firm entry, research and development, and the design of markets. An emphasis will be placed on firm asymmetries, and the emergence of core competencies. Real-life case studies will then be analysed using the tools studied in the lectures.

The course does not require extensive prior knowledge of mathematics, but students should possess the willingness and interest to analyse real world problems using analytical methods and to acquire the tools necessary to do so.


Session: Three
Dates: 3 – 21 August 2020
Lecturers: Dr Kristof Madarasz and Dr Vikram Pathania


 

Programme details

Key facts

Level: 200 level. Read more information on levels in our FAQs

Fees:  Please see Fees and payments

Lectures: 36 hours 

Classes: 18 hours

Assessment*: Two written examinations

Typical credit**: 3-4 credits (US) 7.5 ECTS points (EU)


*Assessment is optional

**You will need to check with your home institution

For more information on exams and credit, read Teaching and assessment

Prerequisites

Knowledge of elementary probability theory, (mean, standard deviation, and basic maximization problem in calculus) plus some introductory economics (marginal costs, fixed and variable costs, monopoly) are recommended.

Programme structure

  • Introduction to decision making

            Choice; Preferences; Utility; Expected Utility; Updating beliefs; Bayes Rule.

  • Game Theory - I

Two-player games; Some examples of static games; Strategies; Common Knowledge and Rationality; Solving Games; Dominant Strategies; Iterated Elimination of Strictly Dominated Strategies; Applications e.g. Second price sealed bid auction.

  • Game Theory - II

Nash equilibrium; K-level thinking, Beauty Contests; Mixed Strategies; Games of Conflict and Cooperation; Applications e.g. Bertrand competition.

  • Game Theory – III

Dynamic Games; Game Trees; Solving dynamic games; Common Knowledge and Strategic Reasoning; Backward induction; Sub-game perfection; Reciprocity, cooperation, and punishment in repeated interactions; Tit-for-tat; Applications e.g. cartel formation.

  • Fairness and Bargaining, Experiments in Strategic Interaction

Two person bargaining games; Trust and Punishment; Fairness; Reciprocity; Psychological Biases, Overconfidence; Experimental Evidence.

  • Auctions

Auction as a market mechanism; sealed bid auctions (first & second price); English auction; Dutch auction; Optimal bidding strategies; Revenue equivalence; Winner’s curse; Other issues such as collusion, sniping etc.

  • Models of Competition

Perfect competition; Monopoly; Oligopoly; Quantity (Cournot) competition; Price (Bertrand) competition; Collusion; Product differentiation; Hotelling model.

  • Market Structure: Entry and Entry Deterrence. Vertical Relations

Describing market structure; C4-ratio; Herfindahl index; Barriers to entry and barriers to exit; Where do potential entrants come from; Strategic entry deterrence; Tactics and trade-offs; Judo Economics; Vertical Integration – make or buy?; Relation-Specific Assets and Hold-Up.

  • Online Marketplaces

Pricing; Centralised prices vs auction; Network effects; Strategy and Market Dynamics; Peer to peer markets; Trust and Reputation mechanisms; Online Experiments.

  • Competitive Advantage & Research and Development.

Value added; Market structure and R&D intensity; R&D rivalry; Monopolists’ and entrants’ R&D incentives; Benefits of the patent system.

Course outcomes

  • Develop a way of thinking about strategic interactions in real life and in business situations
  • Provide a formal, analytical framework through game theory to study aspects of co-operation, co-ordination, differentiation and negotiation
  • Adapt the above framework and incorporate other basic economic and behavioural insights to evaluate good business decisions
  • Develop a clear analytical way of thinking about how firms could create, sustain and appropriate value
  • Provide cases and other real life examples to illustrate the usefulness and complexities of applying theories

Teaching

LSE’s Department of Management is a  world-leading centre for research and education in business and management. Its location within a world-class social science institution at the heart of a leading global city makes it unique among other management and business schools. This position gives the Department the unparalleled capability to deliver research and education which advance the frontiers of understanding in management through an integrated view of the economic, psychological, social, political and technological contexts in which people, teams, organisations and markets operate worldwide.

Proud to be part of LSE, an institution that ranks #2 in the world for social sciences and management (QS World University Rankings 2018) and #1 in the UK for research in business and management studies (REF 2014). LSE Management currently ranks #1 in the world for thought leadership in management (QS Master's in Management Rankings 2018). The Department engages with people and organisations worldwide, across the private, public, and third sectors, who are motivated to improve the world through better understanding and practice of management.

On this three week intensive programme, you will engage with and learn from full-time lecturers from the LSE’s management faculty.

Reading materials

L. Cabral, Introduction to Industrial Organization, MIT Press (2000)
Dixit and Skeath, Games of Strategy, Norton (2004)

*A more detailed reading list will be supplied prior to the start of the programme

**Course content, faculty and dates may be subject to change without prior notice

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How to Apply

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