1. Decision Trees and Game Trees
Reading
- Thinking Strategically (Avinash Dixit and Barry
Nalebuff), Chapter 1, Ten Tales of Strategy
- Thinking Strategically (Avinash Dixit and Barry
Nalebuff), Chapter 2, Anticipating Your Rival's Response
- Packet: Wall Street Journal (Amanda Bennett),
``Nobel in Economics is Awarded to Three for Pioneering Work in Game
Theory,'' 12 October 1994, B12.
Central Idea:
Use game trees, not decision trees.
Antithesis:
Figure out all the probabilities, set up a decision tree, and you'll
make the right decision.
Topics For Class Discussion
- Looking Ahead and Reasoning Back
- Strategic Differentiation
- Boat Racing
- Mixed Strategies
- Sucker Bets
- Guys and Dolls
- The Bid-Ask Spread
Important Terms:
Players-Actions-Payoffs,
Decision Trees vs. Game Trees,
First-Mover Advantage,
Second-Mover Advantage,
Mixed Strategies,
Bid-Ask Spread,
Tournament.
Additional Material
For Next Time
- Thinking Strategically (Avinash Dixit and Barry
Nalebuff), Chapter 3, Seeing Through Your Rival's Strategy.
- The USAir case.
Return to the Thinking Strategically Home
Page at http://pacioli.bus.indiana.edu/erasmuse/g570/g570.htm.
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Rasmusen
. Last updated: March 28, 2002.