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EconomicsofStrategybookexam

Prof.AriHyytinen

Instructionsforexchangestudentswhoplantotake
thiscourseasabookexam(independentoptionstudy)

Updated:31.8.2013

Basics
Thegeneralruleisthatthebookexamsofthiscourse,asdescribedinthisdocument,areforJSBE
exchangestudents.
Thiscoursecanbetakenatintermediate(KTTA245)oratadvanced(KTTS245) level. The formeris
recommended for students who major in business economics. Those who major in economics (or
feellikebeingmoreanalyticallyoriented)canchooseeither,dependingonwhichlevelofthecourse
best fits their needs. Note that there are extra readings that are compulsory for KTTS245, but
optionalforKTTA245.
YoucantakethebookexameitherduringtheAutumnorSpringterm.Oncethebookexamdates
havebeenfixed,theycanbefoundfromhere:https://www.jyu.fi/jsbe/en/studying/exchange.There
isonebookexampossibilityperterm.
To take the book exam, register in Korppi and send me an email (ari.hyytinen[at]jyu.fi), just to
informmethatyouplantotaketheexam.Itisveryimportantthatyourememberusethecorrect
coursecode(intermediate=KTTA245;advanced=KTTS245)whenregisteringfortheexam.
Kindlynotealsothatdespitethename("bookexam"),youareNOTallowedtousetheassignedor
anyotherbookswhenyouactuallytaketheexam.

Coursedescription
Thecoursefocusesoncorporatedecisionmakinginvariousmarketandstrategicenvironments.The
course covers the basic concepts of gametheory and industrial organization and applies them to
decisionmaking,especiallyfromtheperspectiveofcorporatemanagement.Thecourseshowshow
economic analysis and gametheoretic thinking can be applied to business decisionmaking and
morebroadly.

Literature
Thecoursebooksare:
Besanko, D., Dranove, D., Shanley, M. ja Schaefer S. Economics of Strategy, 2010 or
2013,Wiley(InternationalStudentVersion,5thor6thEd.).

Harrington,J.E.Games,StrategiesandDecisionMaking2009orlater,WorthPublishers
Dixit,A.,SkeathS.jaReileyD.H.Jr.GamesofStrategy,2009orlater,Norton.
Notethat
youarenotrequiredtoreadallthesebooks(seethemoredetailedreadinginstructions
below);
Besankoetal.coversgametheoryonlyverybriefly;
thebooksbyHarringtonandDixitetal.arelargelysubstitutesforthepurposesofthis
course;andthat
there is, in addition to the assigned chapters of these books, a small amount of extra
readingsandmaterial(again,seethemoredetailedreadinginstructionsbelow),whichyou
mayfindveryuseful.
Otherentryleveltextbooksongametheoryareusefulandcanalsobeused.Examplesofsuchbooks
includebutarenotlimitedtoWatson,J.Strategy:AnIntroductiontoGameTheoryandGibbons,
R.Gametheoryforappliedeconomists.Amuchlessformalbutexcellentintroductiontostrategic
thinking is Dixit,A. K. and Nalebuff,B.J.Thinking strategically:The competitiveedge in business,
politics and everyday life (highly recommended complementary reading). See also The Art of
Strategy,whichisanewernontechnicalbookonstrategicthinkingbythesameauthors.

Syllabusandrequiredreadings
Thecourseconsistsoffourparts(IIV).PartsIIIIarecompulsoryforall.PartIViscompulsoryonlyfor
those who take the course at the advanced level (KTTS245), but the topics of the part should be
usefulandofinteresttoall.
Therequiredreadingsareasfollows:

PartI:Introduction

Economicsprimer
Besankoetal.:Economicsprimer:Basicprinciples+Chapter2(Horizontalboundariesofthe
firm)

Gametheoryprimer
Besankoetal.:Economicsprimer:Basicprinciples,especiallythesubsectiononGametheory
+HarringtonChapters12and/orDixitetal.,Chapters12.
Seealso:Gibbons,R.(1997)AnIntroductiontoApplicableGameTheoryJournalof
EconomicPerspectives,Vol.11,pp.127149.

Strategyprimer
Besankoetal.:Introduction:Strategyandeconomics+Harrington,Chapter2.4.+vanSteen
(2012,HBSworkingpaper)Atheoryofexplicitlyformulatedstrategy(Introduction+
Discussion+Conlusions;youcanignorethemathematicalmodelforthepurposesofthis
course)

PartII:Strategicreasoningandgametheoreticthinking

Rationalreasoningwithsequentialmoves(extensiveformgames)
Besankoetal.:Economicsprimer:Basicprinciples,subsectiononGametheory+Harrington,
Chapter3and8and/orDixitetal.Chapter3.
Seealso:Chapter3.Gibbons,R.(1997)AnIntroductiontoApplicableGameTheoryJournal
ofEconomicPerspectives,Vol.11,pp.127149.

Rationalreasoningwithsimultaneousmoves(normalformgames)
Besankoetal.:Economicsprimer:Basicprinciples,subsectionGametheory+Harrington,
Chapter4and/orDixitetal.,Chapter4
Seealso:Gibbons,R.(1997)AnIntroductiontoApplicableGameTheoryJournalof
EconomicPerspectives,Vol.11,pp.127149.
Note:ExtrarequiredreadingsforKTTS245:Continuousgamesandstrategiesfrom
Harrington,Chapter6and/orDixitetal.,Chapter5.

BayesruleandBayesianupdating
Manyusefulreadings,seee.g.,Salop(1987)EvaluatinguncertainevidencewithSirThomas
Bayes,JournalofEconomicPerspectives,Vol.1,pp.155160;HoltandAnderson(1996)
UnderstandingBayesrule,JournalofEconomicPerspectives,Vol.10,pp.179187;Dixitet
al.,AppendixtoChapter9.

PartIII:Marketandcompetitiveanalysis

Competitorsandcompetition
Besankoetal.,Chapter5

Entryandexit
Besankoetal.,Chapter6

Dynamicsandcompetitionacrosstime
Besankoetal.,Chapter7

PartIV:GamesofstrategyrequiredonlyforKTTS245

Gameswithimperfectand/orprivateinformation
Harrington,Chapter912and/orDixitetal.,Chapter9.
Seealso:Gibbons,R.(1997)AnIntroductiontoApplicableGameTheoryJournalof
EconomicPerspectives,Vol.11,pp.127149.

Cooperationandreputation
Harrington,Chapter1314and10and/orDixitetal.,Chapter11.
Seealso:Gibbons,R.(1997)AnIntroductiontoApplicableGameTheoryJournalof
EconomicPerspectives,Vol.11,pp.127149.

Note #1: The chapter numbers for Besanko et al., as given above, refer to the 2013 edition
(International Student Version). If you use an older version or some other edition, it is in your
responsibilitytoidentitythechaptersandpartsthatcorrespondtothoselistedabove.

Note #2: You should pay special attention tothe various reviews, summaries and exercises at the
endofeachdedicatedchapter,astheyallowyoutotesthowwellyoumasterthecoursematerial.If
youdonotdoareasonable amountofexercisesto checkyourlearning,itisunlikelythatyouwill
passtheexam.

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