The University of Southampton
Courses

# MANG6100 Game Theory for Business

## Module Overview

The course will provide an introduction on the use of game theory in business applications. On the technical side, it covers solution concepts and computation in different types of games including zero sum and non-zero sum games and cooperative games. It also covers applications such as pricing in duopoly and supply chains; auditing; principal and agent situations. Other topics include auctions, cost allocation, congestion pricing and network games. This module assumes that students can rearrange algebraic expressions (including multiplying out brackets) and differentiate polynomial equations (revision websites will be suggested).

### Aims and Objectives

#### Module Aims

To introduce you to the use of game theory in business applications. It will ensure an understanding of the solution concepts used in game theory and how to calculate such solutions. It will examine a number of different business and management problems and develop game theory models of these problems and indicate how the solutions of these models are used in developing strategies to address these problems.

#### Learning Outcomes

##### Knowledge and Understanding

Having successfully completed this module, you will be able to demonstrate knowledge and understanding of:

• the basic solution concepts of two person zero sum games, two person non-zero sum games and n-person games;
• methods for obtaining the solution of such games;
• how to model a wide range of business problems as games, and how to solve and interpret the solutions of such models.
##### Subject Specific Intellectual and Research Skills

Having successfully completed this module you will be able to:

• analyse business problems and build game theory models of them;
• solve and interpret the solutions of game theory models;
• understand the strengths and weaknesses of game theory as a modelling tool;
• evaluate the appropriateness of game theory models in a number of areas of business.
##### Transferable and Generic Skills

Having successfully completed this module you will be able to:

• you will be able to apply numerical methods to problems;
• use information (both qualitative and quantitative);
• problem solve;
• use appropriate language for a non-expert audience.

### Syllabus

• Introduction to two person zero sum games and their solution; introduction to non–cooperative non-zero sum games and their solutions; introduction to cooperative two person non-zero sum games and their solution • Applications of non-cooperative games in business including auction design and bidding; auditing; pricing and marketing ; principal and agent situations; the use of analysis of conflict in strategy analysis • Introduction and solution of n-person cooperative and non-cooperative games; applications of n-player games in business including cost allocation, congestion pricing and network routing

### Learning and Teaching

#### Teaching and learning methods

Lectures, tutorials, game playing exercises, internet games.

TypeHours
Independent Study63
Teaching12
Total study time75

Theodore Turocy and Bernhard von Stengel (2001). Game Theory.

Davies (2000). Game Theory: A Nontechnical Introduction.

Rasmussen (1996). Games and Information.

N. Nisan, T. Roughgarden, E. Tardos and V. Vazirani (2007). Algorithmic Game Theory.

Luce R.D., Raiffa H (1957). Games and Decisions.

McMillan J (1996). Strategies and Managers.

Fudenberg and Triole (1991). Game Theory.

Kevin Leyton-Brown and Yoav Shoham (2008). Essentials of Game Theory: A Concise Multidisciplinary Introduction.

L.C. Thomas (2003). Game Theory and its Applications.

Osbourne (2003). An Introduction to Game Theory.

Von Neumann J, Morgenstern (1947). Theory of Games and Economic Behaviour.

### Assessment

#### Summative

MethodPercentage contribution
Examination  (2 hours) 70%
Written report  (1500 words) 30%

#### Repeat

MethodPercentage contribution
Examination  (2 hours) 70%
Written report  (1500 words) 30%

#### Referral

MethodPercentage contribution
Examination  (2 hours) 100%

#### Repeat Information

Repeat type: Internal & External

### Costs

#### Costs associated with this module

Students are responsible for meeting the cost of essential textbooks, and of producing such essays, assignments, laboratory reports and dissertations as are required to fulfil the academic requirements for each programme of study.

In addition to this, students registered for this module typically also have to pay for:

##### Textbooks

Recommended texts for this module may be available in limited supply in the University Library and students may wish to purchase the mandatory/additional reading text as appropriate.

Please also ensure you read the section on additional costs in the University’s Fees, Charges and Expenses Regulations in the University Calendar available at www.calendar.soton.ac.uk.

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