Game theory with applications to operations management

Decision making by various entities can result in conflict or cooperation between these entities. Game theory deals with the mathematical modelling of these situations of conflict and cooperation and with the analysis of these models. We will provide a solid introduction to both cooperative game theory and noncooperative game theory. Subsequently, we will focus on several applications in the area of operations management.

Topics

Noncooperative game theory

• Introduction
• Games in extensive form and games in strategic form
• (Subgame perfect) Nash equilibrium
• (Bi-)Matrix games
• Applications: price and quantity competition, auctions , supply chain contracting (buyback, revenue sharing etc.), ...

Cooperative game theory

• Introduction
• Basic properties of (practical) coalitional games
• Core and balancedness
• Single-valued solution concepts and its properties: Shapley value, nucleolus, t -value
• Bargaining
• Applications: (linear) production, cooperating newsvendors, sequencing, ...

Students should have a basic understanding of relevant concepts in both cooperative and noncooperative game theory. Additionally, they should be able to apply these basics to operations management issues.

 
After this course students are able to:

• Model and analyze strategic behavior between decision making entities,
• Model and analyze cooperative behavior between decision making entities,
• Apply key concepts in noncooperative game theory, like games in extensive form and games in strategic form,  (subgame perfect) Nash equilibrium, (bi-)matrix games,
• Apply key concepts in cooperative game theory, like transferable utility games and their properties, core, balancedness, and allocation rules like the Shapley value,
• Formulate suitable noncooperative games, for example for operations management settings with price and quantity competition, auctions, supply chain contracts, and bargaining,
• Formulate suitable cooperative games, for example for operations management settings with (linear) production, sequencing, and multiple newsvendors,
• Support conclusions in situations of conflict or cooperation via solid mathematical reasoning.

You must meet one of the following collections of requirements

• Collection 1
• Completed Final examination Bsc program
• Collection 2
• Completed Pre-Master

• Handouts
• Syllabus
• Papers