Game Theory (2010)

Last up-dated: April 23, 2010

1. Important Announcement

    • Graded finals were just returned to your mail-boxes. Sorry for being late. Here is the comments on final exam and grading. April 23

  • Thanks for taking my game theory class. I really appreciate your hard working. Now, solutions for midterm and final exams are available below. Please take a rest, and have a nice weekend! March 26

  • Graded midterms were just returned to your mail-boxes. Sorry for the delay. The average score is 43 out of 50! Great job :) March 16

  • There will be a final exam on March 26, 18:20-19:50. February 17

  • The afternoon class (13:20-14:50) on March 3rd will be canceled. February 17

  • There will be a midterm exam on February 24th, 9:45-12:15. February 16

  • The class room has been changed from H to F on the 5th floor. February 3

  • We have the first lecture tomorrow, Feb. 3rd, from 10:35 at room 5H. February 2

2. Course Description syllabus

This is an introductory course in game theory, which will provide you with mathematical tools for analyzing strategically interdependent situations, i.e., the situation in which your optimal decision depends on what other people will do. In particular, we will study central solution concepts in game theory such as Nash equilibrium, subgame perfect equilibrium, and the Bayesian equilibrium. To illustrate the analytical value of these tools, we will cover a variety of applications, e.g., international relations, business competition, auctions, marriage market, and so forth. There is no prerequisite for this course, although some background on microeconomics and familiarity of probabilistic thinking would be helpful.

3. Course Outline

  1. Introduction and motivation Feb. 3

    • Website: "Game Theory" by Wikipedia link

  2. Static games and Nash equilibrium Feb. 3

    • Handout: Chapter 2 of Wydick

  3. Why and how is Nash equilibrium reached? Feb. 10

    • Handout: Gibbons (1997) "An Introduction to Applicable Game Theory," Journal of Economic Perspectives, 11: 127-149.

  4. Applications of static games Feb. 10

    • Advanced reading: Chapter 1.2 of Gibbons

  5. Mixed strategy equilibrium Feb. 17

    • Handout: Chapter 7 of Luis Cabral, Introduction to Industrial Organization, 2000.

    • Advanced reading: Chapter 1.3 of Gibbons

  6. Dynamic games and backward induction Feb. 17

    • Handout: Chapter 4.8 of Osborne

  7. Midterm exam Feb. 24 90 minutes, 50 points

    • Files: exam solution

  8. Games in extensive-form Feb. 24

    • Handout: Chapter 15 of Watson

  9. Applications of dynamic games Mar. 3

    • Handout: Pages 268-273 ("Imperfect Competition and Strategic Trade Policy") of Paul Krugman and Maurice Obstfeld, International Economics, 8th edition, 2009.

  10. Bargaining Mar. 10

    • Handout: Chapter 16.1 of Osborne

  11. Repeated games Mar. 10

    • Handout: Chapter 23 of Watson

    • Advanced reading: Chapter 2.3 of Gibbons

  12. Static games of incomplete information Mar. 17

    • Handout: Chapter 27 of Watson

    • Advanced reading: Chapter 3.3 of Gibbons

  13. Applications of incomplete information games Mar. 17

    • Handout: Chapter 3.2.C of Gibbons

  14. Behavioral game theory Mar. 24

      • Handout: Camerer (2008) "Behavioral Game Theory," in The New Palgrave Dictionary of Economics, 2nd ed.

    • Handout: Chapter 13.5 and 13.6 of Bernheim and Whinston, Microeconomics, 2008.

    • Advanced reading: Camerer and Fehr (2006) "When Does 'Economic Man' Dominate Social Behavior?" Science, 311: 47-52.

  15. Review session Mar. 24

    • Handout: Chapter 8 (p.268-) of Walter Nicholson and Christopher Snyder [2]

  16. Final exam Mar. 26 90 minutes, 50 points

    • Files: exam solution comment

4. Textbooks

There is NO official textbook for the class. While lecture notes (slides) will be the main material for the class, the following textbooks are recommended for those who need supplementary readings.

Robert Gibbons, Game Theory for Applied Economists, 1992

Joel Watson, Strategy, 2nd edition, 2008.

A useful text at roughly the same level as Gibbons, but contains variety of example, is:

Martin Osborne, An Introduction to Game Theory, 2004

Those of you interested in pursuing the subject further may consult with following advanced and authoritative sources.

Drew Fudenberg and Jean Tirole, Game Theory, 1991

Roger Myerson, Game Theory, 1991

Martin Osborne and Ariel Rubinstein, A Course in Game Theory, 1994

The following books contain many examples of game theory in action, both in business and in everyday life.

Barry Nalebuff and Avinash Dixit, The Art of Strategy, 2008

The old version with different title (Thinking Strategically, 1991) is also recommended.

Preston McAfee, Competitive Solutions, 2002

John McMillan, Games, Strategies, and Managers, 1992

The following recent textbook provides a lively introduction to the game-theoretic perspectives on economic development, which may especially attract your interests.

Bruce Wydick, Games in Economic Development, 2007

A chapter on game theory in microeconomics textbooks would be helpful. The following introductory and intermediate level books written by the same authors are recommended.

Walter Nicholson and Christopher Snyder [1], Intermediate Microeconomics and Its Application, 11th edition, 2009

Walter Nicholson and Christopher Snyder [2], Microeconomic Theory: Basic Principles and Extensions, 10th edition, 2007

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