Page last modified 2015-2-3

Applied Game Theory (Economics 316)

Winter 2015

Instructor: Ettore Damiano.

Course outline

Announcement: Office Hours - room change

Schedule

Week 1 (1/8)
Main concepts: Game trees, Anticipation principle, Backward Induction.
Readings: Economist's article ``Game theory in practice''; Chapter 1; Chapter 2 (Sections 2.1 and 2.2); and Chapter 8 (Sections 8.1 and 8.2 disregard reference to Nash Equilibrium).
Problems: Assignment 1.
Week 2 (1/15)
Main concepts: strategies vs. outcomes, investment game, underinvestment, incentive design, war of attrition.
Readings: Chapter 8 (sections 8.1-8.5);
Problems: Assignment 2.
Week 3 (1/22)
Main concept: strategic form games, strictly dominated strategies, weakly dominated strategies, deletion of dominated strategies.
Readings: Chapter 2 (section 2.4-2.7); Chapter 3 (sections 3.1-3.3) Plus, you might find the following video entertaining: Golden Balls - split or steal video.
Problems: Assignment 3.
Week 4 (1/29)
Main Concepts: rationality and strictly dominated strategies, iterated deletion of strictly dominated strategies vs. iterated deletion of weakly dominated strategies; applications: IDSDS in a political competition game; IDWDS in a price competition game.
Readings: Chapter 3 (sections 3.4-3.7). Old edition is missing section 3.5 - optional
Problems: Exercises 4, 5, 7, 8, 10 and 11 in Chapter 3;.
Week 5 (2/5)
Main Concepts: best responses, Nash equilibrium, Nash equilibrium vs. IDSDS, IDWDS and Backward Induction.
Readings: Chapter 4 (sections 4.1-4.5).
Problems: Exercises 5, 7, 8, 9 and 10 ( Old edition 11) in Chapter 4. Exercise 2 in Chapter 8.
Week 6 (2/13)
term test
Week 7 (2/26)
Applications: Bertrand competition, investment coordination, location choice and segregation.
Readings: Chapter 5 (we did not cover any of the applications in this chapter, but you might still find it a useful read); Chapter 6 (sections 6.1-6.2); notes 1
Problems: model and solve by backward induction a sequential choice version of the investment coordination and the location choice games considered in class (use an example with a few players); for the investment coordination game show that there are no other Nash equilibria beyond those identified in class; Exercise 3 and 7 in Chapter 5; exercise 2 ( Old edition 3) in Chapter 6.
Week 8 (3/5)
Main concepts: zero-sum games, min-max method, mixed strategies Nash equilibrium.
Readings: Chapter 7 sections 7.1, 7.2 and 7.6.
Problems: Exercise 8 ( Old edition 9) in Chapter 7, question 2 part a) in December 2011 final exam, question 2 in April 2012 final exam, and question 3 in April 2014 final exam.
Week 9 (3/12)
Main concepts: best responses characterization, indifference principle, mixed strategy Nash equilibrium characterization; applications: tax audit, reporting a crime.
Readings: Chapter 7 sections 7.3, 7.4 and 7.5.
Problems: Exercises 3, 4, 5, 6, 7 and 8 ( Old edition 3, 4, 6, 7, 8, and 9 ) in chapter 7.
Week 10 (3/19)
Main concepts: reporting a crime, interpretation of mixed strategies; evolutionary stable strategies.
Readings: Chapter 16 sections 16.1, 16.2, 16.3 and 16.4 (some of the material will be covered in next lecture).
Problems: Exercises 1, 2, 3, 5, 6, 7, 8, 9 in Chapter 16. Question 1 in December 2011 final exam.
Week 11 (3/26)
Main concepts: evolutionary stable mixed strategies, hawk-dove game.
Week 12 (4/2)
first price auctions, second price auction, ascending price auction, descending price auction, revenue equivalence
Problems: Assignment.

Past midterm and final exams