Last up-dated: March 23, 2015
Course number: ECO290E
Winter / Mon. 10:40-12:10 and 13:20-14:50 / Room D
Office hours: Mon. 15:00-16:00 / C911
1. Important Announcement
[March, 16] --- There will be a closed-book final exam on March 30 in class, and no lecture in the afternoon.
[March, 5] --- There was a typo in Question 3; a midterm file is replaced with the correct one.
[March, 4] --- A take-home midterm exam is uploaded here. It is due on March 9 (in class).
[January, 22] --- We have a FIRST lecture on February 9th (Mon) at Room D. See you there :)
2. Course Description syllabus
This is an introductory course in game theory, which will provide you with mathematical tools for analyzing strategic situations - 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 Bayesian equilibrium. Game theory has been widely recognized as an important analytical tool in such fields as economics, management, political science, phycology and biology. To illustrate its analytical value, we will cover a variety of applications that include international relations, development, 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 (schedule below is tentative, subject to change)
1. Introduction and motivation Feb.9
Website: "Game Theory" in wikipedia link
Website: Nobelprize.org link
Movie: A Beautiful Mind link
2. Static games and Nash equilibrium Feb.9
*Reading: Myerson (1999) "Nash Equilibrium and the History of Economic Theory" Journal of Economic Literature link
3. Why and how is Nash equilibrium reached? Feb.16
Handout: Gibbons (1997) "An Introduction to Applicable Game Theory" Journal of Economic Perspectives link
*Reading: Binmore (1987) "Modeling Rational Players I" Economics and Philosophy, 3: 179-214.
4. Static games with continuous strategies Feb.16
Handout: Chapter 7 of Cabral, Introduction to Industrial Organization, 2000.
*Reference: Tirole, The Theory of Industrial Organization, 1988.
5. Mixed strategy equilibrium (1) Feb.23
Handout: Chapter 4.8 of Osborne
*Reading: Rubinstein (1991) "Comments on the Interpretation of Game Theory" Econometrica link
6. Mixed strategy equilibrium (2) Feb.23
Midterm exam (Take-home, 50 points) Take-home Exam
Covers materials on lectures 1 through 6.
File is uploaded on March x, the due day is March 9 in class.
You can submit you answer via an e-mail or bring it to AST before March 9.
Files: exam
7. Dynamic games and backward induction Mar.2
Handout: Chapter 15 of Watson
*Reading: Schwalbe and Walker (2001) "Zermelo and the Early History of Game Theory" Games and Economic Behavior link
*Reference: Kreps, Game Theory and Economic Modeling, 1990 Amazon
8. Games in extensive-form Mar.2
Handout: Chapter 2.1.B-D of Gibbons
Reading: Chapter 15 of Watson
9. Applications of dynamic games Mar.9
Handout: Chapter 11 of Krugman and Obstfeld, International Economics, 8th edition, 2009.
*Handout: Chapter 16.1 of Osborne
10. Repeated games (1) Mar.9
Handout: Chapter 23 of Watson
Reading: Kandori(2008) "Repeated Game" in The New Palgrave Dictionary of Economics, 2nd ed.
11. Repeated games (2) Mar.16
12. Static games of incomplete information Mar.16
Handout: Chapter 27 of Watson
*Reading: Morris (1995) "The Common Prior Assumption in Economic Theory" Economics and Philosophy, 11: 227-253.
13. Applications of incomplete information games Mar.23
Handout: Chapter 3.2.B-3.3 of Gibbons
*Reading: Milgrom (2008) "What the Seller Won't Tell You: Persuasion and Disclosure in Markets" Journal of Economic Perspectives link
*Reading: McAfee and McMillan (1987) "Auctions and Bidding" Journal of Economic Literature link
14. Introduction to market design Mar.23
Reading: McMillan, Reinventing the Bazaar: A Natural History of Markets, 2002.
*Reading: Roth (2002) "The Economist as Engineer: Game Theory, Experimentation, and Computation as Tools for Design Economics" Econometrica link
*Reading: Roth (2008) "What Have We Learned from Market Design?" Economic Journal link
*Reading: "Scientific Background: Stable Allocations and the Practice of Market Design" (by Nobel Prize Committee) link
Blog: Market Design by Al Roth link
Final exam (120 minutes, 100 points) March 30 (11:00 - 13:00)
Covers materials on lectures 7 through 14.
Files: exam
*: Advanced materials
4. Grading
Course grade will be determined by combining grades on a midterm exam (40%) and a final exam (60%). There is NO take-home assignment. You can download the past exams below.
2014: Midterm; Final
2013: Midterm; Final
2012: Midterm; Final
2011: Midterm; Final
2010: Midterm; Final
2009: Midterm; Midterm2; Final
2008: Midterm; Final
5. Textbooks
There is NO official textbook for the class. While lecture notes are the main material for the class, the books listed below might be useful if you need supplementary readings.
The following introductory textbooks contain full of intuitive explanations:
Avinash Dixit, Susan Skeath, and David Reiley, Games of Strategy, 3rd, 2009
Joel Watson, Strategy, 3rd, 2013
If you want to understand game theory in more lucid way, the next two books are recommended. The first one is concise and quite popular, while the second came out recently is more accessible and comprehensive.
Robert Gibbons, Game Theory for Applied Economists, 1992
Steven Tadelis, Game Theory: An Introduction, 2012
Those of you interested in pursuing the subject further may consult the following advanced and authoritative sources (all of them are Ph.D. level).
Drew Fudenberg and Jean Tirole, Game Theory, 1991
Martin Osborne and Ariel Rubinstein, A Course in Game Theory, 1994
(You can download it for free from here)
The following books contain many examples of game theory in action, both in business and in everyday life. The last one also serves an introduction to market design.
Adam Brandenburger and Barry Nalebuff, Co-Opetition, 1996
Avinash Dixit and Barry Nalebuff, The Art of Strategically, 2008
Preston McAfee, Competitive Solutions, 2002
John McMillan, Games, Strategies, and Managers, 1992
John McMillan, Reinventing the Bazaar, 2002
Finally, the following textbook provides a lively introduction to the game-theoretic perspective on economic development.
Bruce Wydick, Games in Economic Development, 2007
6. List of Reading Papers
Lec2: Myerson (1999) "Nash Equilibrium and the History of Economic Theory" Journal of Economic Literature link
Lec3: Gibbons (1997) "An Introduction to Applicable Game Theory" Journal of Economic Perspectives link
Lec3: Binmore (1987) "Modeling Rational Players I" Economics and Philosophy, 3: 179-214.
Lec5: Rubinstein (1991) "Comments on the Interpretation of Game Theory" Econometrica link
Lec6: Schwalbe and Walker (2001) "Zermelo and the Early History of Game Theory" Games and Economic Behavior link
Lec10: Kandori(2008) "Repeated Game" in The New Palgrave Dictionary of Economics, 2nd ed.
Lec12: Morris (1995) "The Common Prior Assumption in Economic Theory" Economics and Philosophy, 11: 227-253.
Lec13: Milgrom (2008) "What the Seller Won't Tell You: Persuasion and Disclosure in Markets" Journal of Economic Perspectives link
Lec14: Roth (2002) "The Economist as Engineer: Game Theory, Experimentation, and Computation as Tools for Design Economics" Econometrica link
Lec14: Roth (2008) "What Have We Learned from Market Design?" Economic Journal link
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