Syllabus
Updated A.Y. 2021-2022
Part I: Static and Dynamic Games of Complete Information
The first part of the course will first deal with static and dynamic games of complete information. After introducing static games of complete information and the normal-form representation, we will focus on the concepts of Iterated elimination of strictly dominated strategies and of pure-strategy Nash equilibrium. We will then apply these concepts to two models of Industrial Organisation, Cournot and Bertrand duopoly, and to the Tragedy of the commons. The next step will be to extend the concept of Nash Equilibrium to account for mixed strategies.
We will then focus on dynamic games of complete and perfect information. We will first introduce the extensive-form representation, and then discuss the concepts of backward induction and subgame-perfect Nash Equilibrium. We will apply these concepts to Stackelberg duopoly and to Sequential Bargaining. We will finally introduce the concept of imperfect information, and see how this assumption affects the solution of dynamic games of complete information, with applications to Bank runs and Tariffs.
Detailed topics
Static games of complete information. Iterated elimination of strictly dominated strategies. The Nash equilibrium in pure strategies. Nash equilibrium in mixed strategies. Cournot model. Bertrand model. The tragedy of the commons. Dynamic games of complete information. Extensive form games and backward induction. Subgame perfect Nash equilibrium. Stackelberg model of duopoly. Bank runs. Tariffs.
References
The reference book for the class is "Gibbons, R. (1992), Game theory for applied economists, Princeton University Press".
Exam
The assessment method is based 100% on the written exam. This is composed of two exercises, including theoretical questions, related to the topics covered in the module (Parts I and II). The grade for the exam is expressed out of thirty points.
Since EEBL students take the exam at the same time as the exam in Industrial Organisation, the grade obtained in each of the two modules will have a 50% weight in determining the final grade for the course. In particular:
Final Grade = 0.5 x (Grade in Game Theory Module) + 0.5 x (Grade in Industrial Organisation Module)
Students will have to obtain at least 18/30 in each of the two modules to pass the exam.