Last up-dated: July 31, 2009
0. Important Announcement
Solution for problem set 2 is revised. July 24
There will be final exam on July 30 (Thu), 15:00-16:30 at class room D.
There will be a make-up class on July 16 (Thu), 9:00-10:30 at class room D.
There will be make-up classes on July 7 (Tue), 10:35-12:05 and 13:20-14:50 at class room E.
1. Course Description syllabus
This is an advanced course in microeconomics, succeeding to Advanced Microeconomics I (ECO600E) in which we study individual economic decisions and their aggregate consequences under ideal situations. In this course, we extend our previous analyses to incorporate imperfectly competitive market structures, dynamic market competitions, and incomplete information. To this end, we study game theory, a collection of mathematical tools for analyzing strategically interdependent situations. Most of the topics covered in this course parallels to those of Game Theory (ECO290E), but are explained in much more rigorous way. Course grade will be determined by combining grades on problem sets (40%) and a final exam (60%).
2. Course Outline long version
Monopoly
[NS] Ch.14
Introduction to Game Theory slide
[NS] Ch.8
Gibbons (1997)
Static games and Nash equilibrium
[G] Ch.1.1
[NS] Ch.8
Mailath (1998)
Static oligopoly models I
[G] Ch.1.2
[NS] Ch.15
Static oligopoly models II
[G] Ch.1.2
[NS] Ch.15
Mixed strategies and existence theorem slide
[G] Ch.1.3
[NS] Ch.8
Dynamic games and extensive-form representation slide
[G] Ch.2.1, 2.2.A and 2.4
[NS] Ch.8
Subgame perfect Nash equilibrium
[G] Ch.2.1.B
[NS] Ch.15
Reny (1992)
Applications of dynamic games
[G] Ch.2.1.D
[NS] Ch.15
Fudenberg and Tirole (1984)
Repeated games
[G] Ch.2.3
[NS] Ch.15
Bagwell and Wolinsky (2002)
Static games with incomplete information
[G] Ch.3.1, 3.2 and 3.3
[NS] Ch.8
Paul Klemperer (2003)
Dynamic games with incomplete information
[G] Ch.4.1
[NS] Ch.8
Applications of Incomplete Information Games
[G] Ch.4.2 and 4.3.A
[NS] Ch.8
Farrell and Rabin (1996)
Bargaining Problems
Nash (1950)
Osborne and Rubinstein (1990)
Review session
Watson (2008)
Final exam
Files: exam solution
3. Problem Set
Problem sets count for 40% of the grade. Each problem set is distributed in class and will be due a week later. Because solutions are published, late problem sets cannot be accepted. You are encouraged to form study group, but must write up solutions independently.
Problem set 1 (due on July 16)
Files: problem solution
Problem set 2 (due on July 23)
Files: problem solution
4. Textbooks
There are two main textbooks for this course:
[G] Robert Gibbons, Game Theory for Applied Economists, 1992
[NS] Walter Nicholson and Christopher Snyder, Microeconomic Theory: Basic Principles and Extensions, 10th edition, 2007
A useful text at roughly the same level as Gibbons, but contains variety of example is:
Martin Osborne, An Introduction to Game Theory, 2004
A useful textbook for game theoretical analyses on oligopoly markets is:
Luis Cabral, Introduction to Industrial Organization, 2000
Those who look for more lucid treatment than the above textbooks may consult with the following authoritative sources. The former incorporates game theoretical perspectives into microeconomics in depth, and the latter is as standard textbook most widely used in Economics Ph.D. microeconomics courses.
David Kreps, A Course in Microeconomic Theory, 1990
Andreu Mas-Colell, Michael Whinston and Jerry Green, Microeconomic Theory, 1995
5. Related Materials
Kyle Bagwell and Asher Wolinsky (2002), "Game Theory and Industrial Organization," A chapter in Handbook of Game Theory with Economic Applications. SSRN
Joseph Farrell and Matthew Rabin (1996), "Cheap Talk," Journal of Economic Perspectives, 6: 83-101. JSTOR
Drew Fudenberg and Jean Tirole (1984), "The Fat-Cat Effect, the Puppy-Dog Ploy, and the Lean and Hungry Look," American Economic Review (Papers and Proceedings), 74:361-366. JSTOR
Martin Osborne and Ariel Rubinstein (1990), "The Aciomatic Approach: Nash's Solution," Chapter 2 in Bargaining and Markets, Academic Press.
John Nash (1950), "The Bargaining Problem," Econometrica, 18: 155-162. JSTOR
Paul Klemperer (2003), "Why Every Economist Should Learn Some Auction Theory," Chapter 2 in Advances in Economics and Econometrics, Volume 1, edited by Dewatripont, Hansen, and Turnovsky. Link to the final draft
Philip Reny (1992), "Rationality in Extensive-Form Games," Journal of Economic Perspectives, 6: 103-118. JSTOR
Joel Watson (2008), "Perfect Bayesian Equilibrium," Chapter 28 in Strategy: An Introduction to Game Theory, W. W. Norton.
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