While teaching is and always will be the major emphasis in the College of Business, research–or intellectual contributions as we like to say–is a close second. It demonstrates the faculty member’s ability to conduct academic inquiries into phenomena in their field, and in so doing, create new knowledge by extending the range of prior findings. The best part is that faculty are free to select the topics they wish to research, but in order to play the game so to speak, you have to do it.
Dr. Eric Hoffman, Associate & Pickens Professor of Economics, knows the “game” very well, but in his case, it’s game theory, a popular topic within his field. “Perhaps the best way to understand game theory is to consider a simple example. Suppose that our hypothetical company must decide on a price to sell our product for, which will be based on the demand for our product,” he said.

“After deciding on a price, however, we notice that our decision has affected the demand for our competitor’s product, which in turn forces them to change their original pricing decision. But such a change in their pricing decision causes a subsequent change in the original demand for our product, which forces us to reconsider our original pricing decision,” Hoffmann continued. “This feedback loop results in strategic competition, where our decisions affect the payoffs and hence decisions of our competitors, which in turn affects our payoffs and decisions. Game theory is the field of economics which allows us to get a grip on such potentially quite complicated tit-for-tat interactions, and most importantly what ‘equilibrium’ will emerge, which is when the competition stops and both parties are content with the prices they have set.”
It’s a subject that hit him hard when he was an undergraduate student. “When I was a young student, the simple idea that we could model things with equations blew me away. The world seems so complicated. How could we possibly predict human behavior with equations like the way physicists predict the behavior of particles?”
This was at a time when he was studying political science, but had become disillusioned in his search for clarity. “But when I saw my economics professor put up supply and demand curves, and say that this is how prices and output are determined in the economy, I was hooked. We could finally make objective statements about how the world works using the beautiful language of mathematics.”
Thus far, Hoffmann has had success in his research, with article publications in Economic Theory, Games and Economic Behavior, Mathematical Economics, and the Journal of Economic Behavior and Organization. His earliest work was in the area of equilibrium selection. “An equilibrium is the long-run prediction of a strategic situation, and is therefore very important to understand. However, in many instances, our models will predict more than one possible equilibrium,” he explained. “On one hand, this may simply reflect the different outcomes that are possible in a complicated strategic setting, but on the other hand, this poses a challenge for the analyst who is trying to make a prediction. Which of the many possible outcomes will be the one that actually emerges?”
Game theory has many applications, even on reality TV shows like Survivor, and the tactics individual players use. “Suppose we have two strong players, two mediocre players, and weak players. Each player must pair with another player and compete against the other pairs in an initial stage, after which the individuals in the winning pair must compete with one another. Now, if both strong players pair, this gives them a certain chance of winning in the initial stage, but may not be optimal, as they would both have to face off against one another strong player in the final round.”
But there are other wrinkles. “Alternatively, if a strong player pairs with a mediocre player in the hopes of having a better chance to win in the final round, that would force the other mediocre player to have to try to pair with the other strong player, since pairing with a weak ability player would spell instant defeat in the initial round. Finally, if a strong and weak player pair, then it would make sense for both mediocre players to pair, as this would maximize each’s chance to survive the initial round and win the final round.”
It is little wonder then that in the early stages of the TV game, the players spend much of their time sizing up everyone else. Each player’s decision can impact the decisions of the other players, and vice-versa. The players likely do not even realize they are in a game-theoretic situation.
Hoffmann, who arrived at WT in Spring 2016 and has taught Principles and Intermediate Microeconomics, Industrial Organization, Intermediate Macroeconomics, Money and Banking, and Quantitative Analysis in Business, is not resting on his laurels. “In the future, I plan on extending my research on learning in games to so-called models of ‘bounded rationality’.”
But after all the research is done and published, what stands out most in Hoffmann’s mind about the COB is its students. “After being in the classroom at a few schools now, one thing that stands out to me is the hard working attitude and the professionalism of the student body. I know this sounds cliché, but it’s true.”