Updated A.Y. 2022-2023
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 what the Nash equilibrium is 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 is predicted by the theory. 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 will 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.
Textbook and course materials
An introduction to Game Theory. Martin Osborne, Oxford University Press.
The game theory course is divided into two parts: the first aimed at introducing and analyzing the theoretical and analytical aspects of game theory. The second part will introduce aspects related to the actual behavior of individuals with respect to what is foreseen by game theory, i.e., how individuals make their own decisions in certain strategic contexts.
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.
Applied 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).
At the end of the course, the student will be able to have the critical analysis tools necessary to interpret and deal with the main problems relating to interactive, strategic, and behavioral relationships with independent judgment.
Communication skills (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 (learning skills)
At the end of the course, the student will have the conceptual tools and knowledge necessary to continue his studies, also critically analyzing the reasons underlying the choices in conditions of strategic interaction.
Basic knowledge of microeconomics and elementary algebra is required.
Frontal lessons, exercises and experimental laboratory
The exam consists of a written exam, one for the first part and one for the second part (plus a mandatory experimental laboratory), necessary to verify the level of knowledge of the topics indicated in the program and treated during the lessons by Prof. Pommey and Prof. Papa.
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 course with the Prof. Papa.
The program and the texts adopted are the same for attending students as for non-attending students.
First part (3 Credits).
The principles underlying the choices in conditions of strategic interaction. What is a dominant and non-dominant strategy, a pure and mixed strategy, Nash equilibrium and how equilibrium is identified in coordination and non-coordination games, and in the prisoner’s dilemma. In sequential games, credible and non-credible threats, the subgame perfect Nash equilibrium. Applications will be carried out in relation to the theoretical course, such as, for example, the equilibrium of Cournot, Bertrand, Stackelberg, the entry game, credible and non-credible threats, and repeated games.
Second part (3 credits)
We will show experimental games to verify how individuals choose with respect to what the theory predicts. We will introduce social preferences by referring to the dictator game, the ultimatum game, the game of trust, the game of contributing to the public good. In particular, we will also develop through experimental laboratories the role of communication and group identity within the game theory with psychological and moral costs. Experimental games will be carried out in the presence or virtual laboratories of behavioral economics.