Game theory is the science of action and reaction. While most standard economic analyses embody the science of making an optimal choice, this kind of analysis is largely undertaken in a vacuum. For example, every managerial economics textbook examines profit maximization for a firm to choose the optimal price and quantity given its cost structure and demand of its customers. However, when a firm raises or lowers its price, this is rarely the end of the story-competitors are likely to react by changing their prices and quantities as well. Game Theory adds in this extra layer of realism.
This book will teach managers to think ahead and foresee possible reactions to their actions. We will examine games played against ones' competitors, against one's employees, against oneself, bargaining situations, and how to get the most out of cooperative teams.
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