Jeroen Swinkels, Ph.D.,
advances game, auction theories
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Jeroen Swinkels, Ph.D., advances game, auction theories |
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Developing 'economic
naturalists' Jeroen Swinkels trains Olin School students to think more clearly and analytically about their business environment By Robert Batterson Ask Jeroen Swinkels, Ph.D., the August A. Busch Jr. Distinguished Professor of Managerial Economics and Strategy in Olin School of Business, what he likes best about what he does, and you'll get an ample dose of his enthusiasm. "Olin is a school on the move," Swinkels says. "Coming here, I knew there would be opportunities to help build the place.
Swinkels investigates these strategic settings using techniques that lie at the junction of mathematics and economics. Chief among them is game theory, of which John Forbes Nash, the brilliant but troubled Nobel laureate in economics, is a forefather. Nash is renowned for his groundbreaking contributions to economics and mathematics. Among his contributions is the "Nash Equilibrium," which has figured prominently in economics for decades and has a growing role in the strategy field. "Nash's big contribution was to provide the central first solution concept for thinking about nonzero sum games -- that's the Nash Equilibrium," Swinkels says. "It's a situation where, given the action you have chosen, I can do no better taking the action I've chosen, and given what I have chosen you can do no better than taking the action you've chosen." Swinkels says these "nonzero sum games" are more interesting economic cases than zero-sum games where one player's gains always come at the expense of another. He has been intrigued with mathematics and games all of his life but is quick to clarify that a game by an economist's definition is not just "Monopoly or chess": "When an economist says 'game,' he means any strategic situation in which the payoff to the various players are a function of the interaction of their strategies. Two airlines thinking about how to price their tickets are playing a game, as are politicians thinking about where to position themselves in the political spectrum." A native of Canada, Swinkels grew up in Rossland, British Columbia, a small town where his father worked as a research metallurgist for a large lead and zinc mining company and his mother worked as a homemaker. "Within 120 miles of where I grew up, there wasn't a town of more than 10,000 people," Swinkels says. "Once a month, my mother would drive us 2 1/2 hours into the States to get our braces adjusted. "Small towns were smaller back then. We didn't have the Internet; we didn't have hundreds of channels on TV. But education was viewed very seriously. Quite a remarkable number of the kids that I went to school with are university faculty now."
It was while attending Queen's University in Canada, where he earned a bachelor's degree in economics with honors, that Swinkels knew he wanted to make the study of economics his life's work. An economics professor at Queens, Dan Usher, showed him the way. "I wrote an undergraduate thesis under Dan. He was terrific in terms of giving me my first real glimmer of what real research was like," Swinkels says. "Instead of telling me what to do next, he simply asked the right questions to get me to see the holes in what I had done, and let me figure out how to fix it É it was like doing research with training wheels." After the completion of his doctorate at Princeton University, Swinkels was a member of the department of economics at Stanford University for two years and then joined -- and three years later was tenured -- at the J.L. Kellogg Graduate School of Management at Northwestern University. In 1997, Olin Dean Stuart I. Greenbaum, Ph.D., lured Swinkels from Northwestern to the Olin School. It is a hiring decision Greenbaum says he is very happy about. In May 1998, Swinkels was named to the Busch distinguished professorship. "Professor Swinkels is the consummate academic 'franchise player,'" Greenbaum says. "His research is held in the very highest regard worldwide. His teaching is exemplary, and his faculty leadership is absolutely invaluable to Olin." Swinkels teaches a course called Competitive Industry Analysis (dubbed the "CIA" by his students), a case-based course that takes the tools of modern industrial organization, game theory and economics and uses them to try and understand how businesses formulate strategy. Cases analyze everything from Nintendo's decisions on when to launch new versions of their video-game system to an attempt by a Dutch chemical company to go up against Monsanto in the aspartame (NutraSweet) business. "Jeroen has had a tremendous impact at Olin," says Ambar Rao, Ph.D., the Fossett Distinguished Professor of Marketing in the business school. "Part of that is his teaching, with the introduction of Competitive Industry Analysis, and part of that has been his research, which has been a magnet for new hires. People know his research, so they know that he would be a good person to mentor them in their careers." Swinkels says, "I really do enjoy teaching. I like helping people learn to think, and running a good case discussion is a blast. I want my students to be able to think more clearly and analytically about their business environment. "I want them to become economic naturalists, so they don't just see stuff; they ask themselves, 'Well, why is that the way it is? Is there some way I can change it in a way that makes it better?' What game theory really pushes you to do is think very carefully through whose incentives are where and how my incentives and your incentives work together to create a market outcome." For the last several years, the area of research that has occupied Swinkels most at Olin is auctions. In particular, he has been a leader in the study of the properties of auctions in which there are both many bidders and many units for sale. His work in this area has generated multiple publications in the best journals in the economics profession and has excited a large amount of follow on research. "The downside, of course, is that now I get asked to referee all this stuff," Swinkels says. "For an economist, an auction is not just the kind of obscure thing that happens at Christie's or Sotheby's. An auction is a general model for where prices come from, which is a classic economics problem. Out there in the economy, there is dispersed a great deal of information: Is this a good stock or a bad stock, is there oil in this particular piece of ground, how desperately do people want a jade green Camaro? A price-formation process somehow magically pulls all of this information together and comes up with an answer, both in terms of who trades with whom, and how much money changes hands. "Remarkably, the price in these markets will often be much 'smarter' than any given individual. This is something we have known at a less formal level for a long time. But, the nitty-gritty foundations for how individual strategic behavior translates into prices are not as well understood as we'd like. Trying to improve those foundations is what my research into auction theory is all about." |
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