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GAME THEORY

Second part - Behavioral Approach

Program

EN IT

Updated A.Y. 2021-2022

Game Theory: Rational (First Part - Prof. Guillaume Pommey) and Behavioral (Second Part - Prof.  Stefano Papa) Approach

LEARNING OUTCOMES: The course aims to provide students with the basic tools to solve strategic interaction problems. During the first part of the course the basic concepts of game theory are introduced, defining the dominant or dominated strategy, the Nash equilibrium, in coordination games and in the prisoner's dilemma. We define the Nash equilibrium in mixed strategies. In sequential games, we introduce credible and non-credible threats, and we define the subgame perfect Nash equilibrium. 
Behavioral game theory refers to how individuals choose over what the theory predicts. We will introduce social preferences by referring to the dictator game, the ultimatum game, the trust game, the public good game. We introduce the psychological and moral costs, in particular we refer to the role of communication and the social identity within game theory with psychological and moral costs. Experimental games will be carried out through experimental or virtual laboratories.

KNOWLEDGE AND UNDERSTANDING: The course aims to provide the student with both the theoretical and methodological tools through which he can have an organic framework of basic knowledge useful for understanding the strategic interaction in cooperative and non-cooperative games, simultaneous and sequential games.

APPLYING KNOWLEDGE AND UNDERSTANDING: Students will participate in several experimental games where they will make strategic decisions. We will show how to prepare an experimental design, how to test hypotheses and how to analyze data extrapolated from experiments in a virtual laboratory or in presence (or blended).

MAKING JUDGEMENTS: 
At the end of the course, the student will be able to have the critical analysis tools necessary to interpret and face the main problems relating to interactive or strategic relationships with autonomy of judgment.

COMMUNICATION SKILLS: The student will acquire the ability to communicate, expressing himself with economic-technical language properties, his own knowledge acquired in the context of the topics covered during the course.

LEARNING SKILLS: At the end of the course, the student will have the conceptual tools and knowledge necessary to continue their studies, also critically analyzing the motivations underlying the choices in the contexts of strategic interaction.

 

Basic knowledge of microeconomics and elementary algebra is required.

 

Second part - Behavioral Approach (3 Credits)


Experimental games to verify how individuals choose with respect to what is predicted by the theory.
Experimental Literature and evidences from laboratory. 
Dictator Game,
Ultimatum game,
Trust game,
Public good game.
Social preferences (conditional or unconditional, distribution, psychological and moral)
Distinguish between the motivations underlying the choice (design and experiments)
The role of communication
Psychological and moral costs.
The role of social identity
Students will play experimental games in the behavioral economics laboratories in the presence or virtual or mixed.

 

The exam consists of a written exam, one for the first part and one for the second part (plus a mandatory experimental laboratory in the second part), necessary to verify the level of knowledge of the topics indicated in the program and treated during the lessons by Prof. Pommey (first part) and Prof. Papa (second part). 
The task consisting of different questions and exercises. It focuses on everything done in class.
The assessment will be based on the following criteria: Knowledge of the topics, ability to apply rational or behavioral theory to specific problems, language properties and analytical skills.
Possible outcomes, as the average of the two written exams of the two parties: Best result: 30 cum laude; excellent result from 30 to 28; good result from 27 to 26; fair result from 25 to 23; from 22 to 20 satisfactory outcome; from 19 and 18 sufficient outcome.
As said above, in addition to the written exam, it is necessary to carry out an experimental laboratory during the second part of course with the Prof. Papa.

 

References

Forsythe, Robert; Horowitz, Joel L.; Savin, N.E.; Sefton, Martin (1994). "Fairness in Simple Bargaining Experiments", Games and Economic Behavior, 6: 347–  369.
Güth, W.; Schmittberger, R. & B. Schwarze (1982). "An Experimental Analysis of Ultimatum Bargaining". Journal of Economic Behavior and Organization, 3: 367-388.
Fehr E. and Schmidt K. M (1999), "A THEORY OF FAIRNESS, COMPETITION, AND COOPERATION", The Quarterly Journal of Economics, 114: 817–868
Berg J., Dickhaut J. and McCabe K. (1995) Trust, Reciprocity, and Social History*, Games and Economic Behavior, 10,122-142.  
Cox (2004), How to identify trust and reciprocity, Games and Economic Behavior, 46: 260-281.
Di Bartolomeo G. e S. Papa (2016): “Trust and reciprocity: Extensions and robustness of triadic design,” Experimental Economics, Springer: 19 (1): 100-115. 
Charness, G. and Dufwenberg M. (2006), "Promises and Partnership" Econometrica 74: 1579-1601. 
Vanberg, C. (2008), “Why do people keep their promises? An experimental test of two explanations,” Econometrica, 76: 1467-1480.
Di Bartolomeo G., Martin Dufwenberg, S. Papa e F. Passarelli (2019): “Promises, expectations & causation", Games and Economic Behavior, 113: 137–146.
Chen, Y. and S. X. Li (2009), “Group identity and social preferences,” American Economic Review, 99: 431-457.
Ciccarone, G. Di Bartolomeo, G. Papa S. (2020), "The rationale of in-group favoritism: An experimental test of three explanations", Games and Economic Behavior 124: 554-568.