Page last modified 2015-2-3

Applied Game Theory (Economics 316)

Winter 2015

Instructor: Ettore Damiano.

Course outline

Announcement: Office Hours -

Announcement: Tutorial Sections Friday February 27


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 (2/27)
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.

Past midterm and final exams