• University of Exeter Business School
• Module

Industrial Economics and Strategy

Module description

Summary:

Game theory describes situations where a number of individuals interact. The individuals will typically be competing in some sense however there is also scope for cooperation. Game theory allows us to model formally concepts such as reputation and how a good reputation can increase the scope for cooperation. There are many applications to war and conflict, elections, auctions, etc. We shall focus one application in particular that of small numbers of firms competing within an industry.

Additional Information:

Internationalisation

The content of this module is mathematical and, therefore, relevant in any country.

Sustainability

All of the resources for this module are available on the ELE (Exeter Learning Environment). External Engagement
Previously, we had a guest speaker from Mars Chocolate who spoke on the use of Game Theory within the company.

Employability
 

This is a difficult module, so the mathematical skills that students acquire are valued by employers.

Module aims - intentions of the module

The aim of the module is to develop students’ knowledge of game theory. This will include the various solution concepts for normal and extensive form games, their advantages and disadvantages. Students will understand how to apply game theory to economic problems. In particular the module will develop understanding of strategic behaviour by firms in imperfectly competitive industries. We shall study strategic issues arising from entry to and exit from industries.

Intended Learning Outcomes (ILOs)

ILO: Module-specific skills

On successfully completing the module you will be able to...

• 1. An in-depth understanding of theoretical issues in game theory and how they can be applied in industrial organisation

ILO: Discipline-specific skills

On successfully completing the module you will be able to...

• 2. The analytical skills to understand theoretical developments in game theory, extended skills in mathematical and quantitative techniques, the ability to construct and interpret theoretical models that employ game theoretic tools
• 3. An understanding of how strategic interaction among small numbers of firms in a market-specific context, or countries in a global context can be modelled as a non-cooperative game

ILO: Personal and key skills

On successfully completing the module you will be able to...

• 4. The ability to communicate logical arguments in writing (via module assignments and exam)
• 5. Problem solving skills

Syllabus plan

The focus is on non-cooperative game theory and applications in industrial organisation:

• Solution concepts for games, dominance, iterated dominance, Nash equilibrium
• Cournot and Bertrand oligopoly.
• Two stage oligopoly models
• Games of Incomplete Information
• Applications including entry deterrence and predatory pricing

Learning activities and teaching methods (given in hours of study time)

Details of learning activities and teaching methods

Formative assessment

Summative assessment (% of credit)

Details of summative assessment

Details of re-assessment (where required by referral or deferral)

Indicative learning resources - Basic reading

Basic reading:

• Tirole, J. (1988) The Theory of Industrial Organisation, Cambridge,MA. MIT Press
• Belleflamme, P. and Peitz, M. (2015) Industrial organization: markets and strategies, Cambridge University Press, Cambridge UK
• Eichberger J. (1993) Game Theory for Economists, San Diego. Academic Press

Indicative learning resources - Web based and electronic resources

• ELE – College to provide hyperlink to appropriate pages

Indicative learning resources - Other resources

None

Key words search

Game Theory, Industrial Organisation, Oligopoly, Monopoly