Game Theory and Economic Analysis

Course Objective: This course outlines the efficacy of game theory in analysis of ubiquitous economic problems of bargaining, signalling and conflict. Contrary to the computational and computer scientific perspectives, the present course espouses the role of game theory in sustenance of social equilibria. 

Introduction of Game Theory. 

  • Classifications of games, Terminology and assumptions.

Simultaneous games of complete information. 

  • Normal form games, Dominant strategy equilibrium, Iterated strict dominance, Nash Equilibrium in pure strategies, Cournot duopoly, Prisoner’s dilemma, Battle of Sexes, Problem of commons, Final offer arbitration, Strategic Voting, Non-existence of pure strategy Nash equilibrium

  • Mixed strategies, Existence of Nash equilibrium, Matching coins

Dynamic games of complete information. 

  • Extensive form games, Perfect and imperfect information in dynamic games, Stackelberg duopoly, Wage bargaining, Rubinstein’s bargaining (finite version), Nebulous skill enhancement

  • Subgame perfection, Bank Runs, Finite stage repeated games, Cournot duopoly and collusion

 Static Bayesian games. 

  • Normal form representation, Bayes’ Nash equilibrium, Cournot duopoly under incomplete information

  • Mixed strategies revisited, First price sealed bid auction

Dynamic Bayesian games.

  • Perfect Bayesian Nash equilibrium

  • Job-market signalling, Bargaining under asymmetric information

Texts/References: 

Gibbons. Game Theory for Applied Economists. Princeton University Press, 1992 

Osborne. An Introduction to Game Theory. Oxford University Press, 2004 

Osborne and Rubinstein. A Course in Game Theory. MIT Press, 1994 

Binmore. Playing for real: A text on game theory. Oxford University Press, 2007

Fudenberg and Tirole. Game Theory. MIT Press, 1991