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## Syllabus

EN IT

### Learning Objectives

TRAINING OBJECTIVES
Identify the structural elements of basic strategic interactions, and represent a strategic interaction as a game. Provide to the student the main concepts of equilibrium needed to
solve static and dynamic games, identifying equilibrium strategies and the solutions to the game.

KNOWLEDGE AND UNDERSTANDING
The course provides the fundamental tools to analyze the most common strategic interactions in economic theory. Students are presented with a logical-mathematical analysis of the topics of the course and invited to adopt this method to formalize their ideas. The formal structure of strategic interactions is covered from the very beginning of the coure, together with the main results in terms of equilibrium and structural hypotheses to obtain them. At the end of the course, students will have a clear comprehension of the basics of Game Theory for non-cooperative games.

ABILITY TO APPLY KNOWLEDGE AND UNDERSTANDING
Students will be nudged to identify the basic elements of the strategic interactions covered in the course and to represent them as a game. On the basis of the key concepts of
equilibrium in static and dynamic non-cooperative games, students will be able to identify equilibrium strategies and their outcomes.

### Prerequisites

Basic knowledge of microeconomics and elementary algebra is required. These prerequisites are the same for attending and non-attending students.

### Program

GAME THEORY: Rational Approach.
Week #1
Choices in contexts of strategic interaction.
Dominant and dominated strategy.
Iterated Elimination of Strictly Dominated Strategies
Pure strategy,
Week #2
Nash Equilibrium.
Coordination and non-coordination games
Prisoner's Dilemma
Bertrand equilibrium,
Week#3
Cournot equilibrium,
Mixed strategies
Sequential games, credible and non-credible threats,
Subgame Perfect Nash Equilibrium
Entry Game
Week#4
Equilibrium of Stackelberg,
Repeated games.
Second part - Behavioral Approach to Game Theory
Experimental games to verify how individuals choose with respect to what is predicted by the theory. Experimental Literature and evidences from laboratories.
Dictator Game,
Ultimatum game,
Week #5
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
Week #6
All the Students will play experimental games in the laboratory.

### Books

An introduction to Game Theory
by Martin Osborne
Oxford University Press

### Bibliography

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.
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. Duwfenberg, M. Papa, S. Passarelli F. (2019), "Promises, Expectations & Causation", Games and Economic Behavior, 114: 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.

### Teaching methods

Lectures, exercises, and experimental games in laboratory

### Exam Rules

The exam consists of a written exam, necessary to ascertain the level of knowledge of the topics indicated in the program and covered during the lessons by the Prof. Papa.
Additionally, one or more experimental games will have to be played by all students in the laboratory. These games will be mandatory for verbalizing the written exam.
The exam is based on a written test. It consists in solving problems, exercices and in answering theoretical questions, with open answers questions. The answers will be evaluated on the basis of the correctness of the result obtained; the theoretical questions will be evaluated according to the knowledge of the contents of the theories. The exam 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 of the written exam:
18-20: just sufficient knowledge and understanding of the topics with multiple imperfections. Sufficient analytical, synthesis and independent judgment skills.
21-23: Knowledge and understanding of routine topics. Correct analysis and synthesis skills with coherent logical argumentation.
24-26: Fair knowledge and understanding of the topics. Good analytical and synthesis skills with rigorously expressed arguments.
27-29: Complete knowledge and understanding of the topics. Remarkable analytical and synthesis skills. Good independent judgement.
30-30L: Excellent level of knowledge and understanding of the topics. Remarkable analytical and synthesis skills and independent judgement. Arguments expressed in an original way.
Furthermore, as mentioned above, to register the exam in addition to the written exam, it is necessary to play one or more mandatory experimental games (incentivized with money for the students).