School of Business Spotlight

Blending Research, Education, and Fun

Professor Gomez looks down at the king of spades he is holding in his hand then looks at his watch.

“He’s bluffing!”

The shout emanates from across the table where a single student sits, flanked by his collegiate colleagues. After a moment of decision, Professor Gomez places another dollar in the pot.

“He doesn’t have it.” The half-circle of students are eager to give advice.

The student looks down at the money he has left. He reaches for the money, looks across and folds, losing the showdown.

The class is Special Topics focusing on game theory and playing games at every session is not only part of the fun, but it is instrumental to learning this challenging study that blends math, economics, behavioral psychology, and several other disciplines.

Q and A with Dr. Gomez

Gomez recently taught Business 490 and 590, a cross-listed (offered to both Undergrad and Grad) special topics class that is focusing on game theory.

Question: The focus of the class is game theory. Was this topic preselected for you?

Dr. Gomez: No, definitely not. Game theory is my area of study and research. That is what makes UWB a really great university to teach for. You are encouraged to involve your research with your teaching.

Question: Can you define game theory for me?

Dr. G: It is the study of strategic interaction, by which we mean, situations where players have to think about the actions of others and how they are going to affect their payoffs. The main application of game theory has been in economics. For instance, when there are a few firms in the market you have to begin to think in this way. Every firm must think about what the others are going to do and how are they going to respond. You have to get in the other players’ shoes and think about what they would do.

Question: Is this something you can apply to all business situations?

Dr. G: No, there are cases where game theory is not as relevant. In situations where there is a monopoly and a firm controls everything, price, quantity, and so on, or in cases where firms are too numerous and too small to really affect each other with their decision making. The cellphone industry is a prime example of a situation where game theory is applicable. There are only four major players, so it’s like a chess game.

Question: How do you organize this class?

Dr. G: These are four and half hour sessions, so it is important to be creative. We play at least one game every session. It is a graded activity, so the students have an incentive to compete. Then we analyze and draw case studies from the real world in which this game could be useful. Usually we divide the fifteen students into four teams. Each team chooses a representative, but decisions are reached by a consensus of the group.

Question: Is game theory cooperative or competitive, or is it a mixture of both?

Dr. G: Both elements can coexist. For example, you have to cooperate with rivals to decide what the size of the pie is, but then you must compete with them to split up the pie. When we think of the word game, we think of a winner and a loser, but that is only a small fraction of the games we study. We also study games in which both players can win and both can lose; sometimes they want to coordinate and cooperate.

Question: Teaching this as an undergrad-grad cross-listed course seems fitting considering that game theory seems like an eclectic study—incorporating mathematics, psychology, group behavior and so on. Do you find that the diversity of educational background improves the class experience?

Dr. G: The mixture definitely helps the class. We have a great diversity of students at UWB, they are committed and very enthusiastic. Most of them have worked an entire day before they come to class each night, which implies they really want to be there. It is an excellent environment to teach game theory.

Question: Who might be interested in game theory?

Dr. G: To understand the basic concepts, an interest in math is good but not necessary. Indeed, game theory is applicable to everyday life. Any activity that involves maintaining a reputation, your work, your career, even parenting, they are all susceptible to being studied using game theory. Principle-agent games, for example, are the equivalent of the employer-employee relationship.

Question: Is game theory more relevant today given the current economic outlook and increased globalization?

Dr. G: Yes, absolutely. The importance of game theory within economics has been highlighted by the choice of the 2005 and 2007 Nobel prizes: Five game theorists were distinguished with this important award. Among them, I had the fortune to call Leo Hurwicz as my mentor at the University of Minnesota. He recently passed away.

Question: Do you find that teaching helps your research?

Dr G: Yes, very much. The students always challenge you with questions that you had not yet considered. In fact, four of my current students are interested in conducting an independent study with me next quarter.

Question: Last question. It seems like you can’t teach game theory without mentioning John Nash, do you let your students watch “A Beautiful Mind?”

Dr. G: Absolutely. We watch the bar scene where the Nash Equilibrium is explained. [Laughs] Then we model it and see how the movie is inaccurate.

At the end of the game, Professor Gomez has accumulated a sizeable stack of winnings, and while game theory is the focus of his research, what the students will later realize is that the game is rigged for him to win; he only needs to play by a specific formula to achieve his desired outcome. And what he will enjoy telling them later, is that looking at his watch was a randomization device used to decide whether he should bluff or fold his poorer hands, not a tell.

This is the cycle of education at UWB. The students receive an expansive and comprehensive education—receiving inspiration and guidance from their professors, the educators work on their research—garnering new ideas and uninvestigated angles from their students. And at the end of a four hour long class at 10:00 pm on a Thursday what is most obvious, is that they are having fun while accomplishing all of this.