Syllabus

Submitted by Christopher G. Kingston on Friday, 8/27/2010, at 1:30 PM

 

“Game Theory”, or multiperson decision theory, is a set of modeling tools used to analyze strategic situations: situations in which multiple players interact and attempt to pursue their goals while taking account of their interdependence.  Game theory has been applied to study strategic conflict and cooperation in a wide variety of settings in economics, political science, biology, law, and elsewhere. Such situations can include, for example: interactions between firms in imperfectly competitive markets; auctions; arms races; political parties or candidates competing for votes; competition for mates; ethnic conflict; warfare; and chess.

This course will provide an introduction to the tools and insights of game theory.  Though mathematically rigorous, emphasis will be on applications rather than on formal theory.  Intermediate micro (Econ 54 or 58 or equivalent) is a prerequisite.  Exceptions may be possible, but you need to see me as soon as possible if you have not already taken intermediate micro.

Readings

We will not stick closely to any one textbook. Game Theory for Applied Economists by Robert Gibbons is a clear and concise, but somewhat dry and technical exposition of the main themes of the course.  For a more readable treatment, I also recommend Martin Osborne’s An Introduction to Game TheoryStrategies and Games: Theory and Practice by Dutta may be worth a look if you don’t mind algebra.  Games of Strategy, by Dixit & Skeath is a gentle introduction but somewhat below the level of this course.  If you’re feeling ambitious, the best graduate-level textbook (above the level of this course) is Game Theory by Fudenberg and Tirole.  Copies of the Gibbons and Osborne books are on reserve at the library.

Grading

There will be a 3-hour final exam, worth 45% of your course grade, and a 2-hour midterm worth 25% of your grade (possibly on the evening of Friday October 22nd; if you foresee a scheduling conflict, please let me know soon).  There will also be six problem sets at 2-week intervals during the semester, each worth 5%.  These will be handed out on Thursdays, and due on the following Tuesdays in class.  You can hand in one problem set up to 48 hours late without penalty; after that, problem sets handed in late will be penalized.  I encourage you to work together in groups as you tackle the problem sets, but the work you ultimately hand in must be your own.  Solving problems is the only way to really learn Game Theory, so it is vital that you understand what you turn in on the problem sets.

Course Outline

Week 1

 

Introduction

Gibbons, chapters 1.1, 2.1A

Osborne, chapters 1, 2, 5

Dutta, chapters 1, 2

Week 2

 

Equilibria in Strategic Form games

Gibbons, chapters 1.1–1.2

Osborne, chapters 2, 3

Dutta, chapters 3, 4, 5, 6

Weeks 3-4

 

Strategic form games with –Continuous strategies

–Mixed Strategies

 

Gibbons, chapters 1.2–1.3

Osborne, chapters 3, 4

Dutta, chapters 7, 8

Weeks 4-5

 

Extensive form games

Bargaining

Gibbons, chapters 2.1–2.4

Osborne, chapter 5, 6, 7, 16

Dutta, chapters 11, 13

Weeks 6-7

 

Repeated Games

 

Gibbons, chapter 2.3

Osborne, chapter 14, 15

Dutta, chapters 14, 15

 

 

(Midterm)

 

Weeks 8-9

 

Evolutionary Game theory

 

Osborne, chapter 13

 

Weeks 9-10

 

Moral Hazard (The Principal-Agent model)

 

Dutta, chapter 19

Weeks 11-12

 

Games of incomplete information (Bayesian Nash equilibrium)

Gibbons, chapters 3.1–3.2

Osborne, chapter 9

Dutta, chapter 20

Weeks 12-13

 

Adverse Selection

Signalling (Perfect Bayesian equilibrium)

Gibbons, chapters 4.1–4.3

Osborne, chapter 10

Dutta, chapter 24

Week 14

 

Experimental evidence on rationality and game theory

Goeree & Holt, “Ten little treasures of Game Theory and ten intuitive contradictions”, American Economic Review, Dec. 2001.

 

Taking Notes