This document provides an overview of game theory concepts and applications. It discusses why game theory is useful for analyzing strategic interactions between rational decision-makers. Examples are given of games that individuals and businesses play, such as coordination games, prisoner's dilemmas, mixed strategies, repeated games, and more. The document also summarizes a case involving Toys "R" Us restricting toy manufacturers from selling to warehouse clubs to prevent further growth of those competitors. It prompts the reader to consider what actions they would take in that situation and how to properly define the strategic game being played.

1. Game Theory “ Only the paranoid survive.” - Andy Grove, Co-founder of Intel Mike Shor Lecture 1

7. Game Theory Administratrivia

10. Disclaimer #1

11. Disclaimer #1 A theory provides a way to organize our thinking. Theory is the science of business, not the art .

13. Disclaimer #2

14. Disclaimer #2

20. Policies They have a lovely “ No cell phone” policy here…

22. The Golden Rule COMMANDMENT Never assume that your opponents’ behavior is fixed. Predict their reaction to your behavior.

28. Is Game Theory Moral? A student cheats on his exam. A corporation fudges its accounts to boost its stock price. A professor lies about his past. A politician sends out a newsletter with one opinion to one group of constituents, another newsletter with an opposing opinion to another group. A store chain uses underhanded methods to gain locations. Are these all independent actions, or part of a larger attitude that's eating away at ethics in this country? To me, they seem part of the ''realist'' approach to politics, especially as exemplified by ''game theory.'' Game theory starts out by saying forget about morality, feelings and emotions; we are going to assume that a rational person is going to always act in his own best interests. In other words, self-interest is king, a theory as old as man. Thucydides noted it in 400 B.C. Machiavelli described it in the 16th Century, and perhaps every generation has come up with theories, explanations and justifications for acting selfishly. Game theory goes on to say that you should expect people to lie, and so you also might want to lie. Isn't this a wonderful concept to be teaching our college students? Here's a quote from one of the textbooks used in game theory courses, ''Thinking Strategically,'' by Avinash Dixit and Barry Nalebuff: ''Individuals' incentive to cheat on any agreement should be recognized and made a part of their strategy choice.'' In a roundabout way, this teaches that cheating is not only acceptable, but to your advantage. Further, game theory suggests that in order to get a competitive edge, you might want to pretend to be insane, so that your opponent won't be able to judge which way you're going to jump. Well, we've seen that in politics, haven't we? Perhaps Dr. Strangelove was only pretending. However, this seems in reality a pretty insane course to take, and might easily have unintended consequences. (see “Mindless Commentary”, p. 3) Teddy Milne October 22, 2002 ‘ Game Theory’ Excuse for Anything

35. Defining the Game CAVEAT Predict opponents’ reaction to your behavior. BUT Be sure you understand who your opponents are. (Do you know everyone who may react to your decisions?)