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Game Theory

Course description

The course "Game Theory" is a methodological course to analyze strategic behavior of agents. The course introduces basic concepts of non-cooperative game theory in combination with applications dealing with competition in oligopolistic markets, sequential bargaining, limit pricing, credence goods, political competition or cartels. In this course we will focus on decision making in economic and business settings, but the ideas of game theory can be applied to a wide array of  situation and are widely used by e.g. psychologists, in political sciences, but also in the natural sciences such as biology or computer sciences.

The intensifying course aims at practicing the solution concepts studied in the course and applying them to a wider range of examples. The course and the accompanying IK will be extremely closely integrated, and it is recommended to be taken parallel. It is not useful to attend the IK before the course.

Target group

  • Students from the Master Programs Economics (compulsory) and  Economic and Business Analytics
  • Everyone, who is interested in the analysis of strategic thinking is highly welcome! 

Prerequisites

Basic knowledge of micreeconomic theory and mathematics

Course requirements

  • Attendance: There will be no mandatory attendance, although it is of course highly recommended. Attendance is incentivized by extra credits for the final grade
  • KS: There will be a final exam, counting for 95% of the grade, 5% for attendance.
  • IK: You are asked to solve a problem set for each unit, which will be jointly discussed together in class. At the beginning of each class, you indicate on a list, which examples you have prepared and are willing to present. You need minimum 60 out of 120 feasible points for a positive grade. You receive extra credits for every additional point. Furthermore, there will be two short tests during semester. Your are required to achieve at least 50% of feasible points for a positive grade. Grading consists of the sum of test scores plus extra credits from the problem sets and presentations.

Literature

Main textbooks:

  • Robert Gibbons, A Primer in Game Theory, Harvester Wheatsheaf, 1992
  • Martin Osborne, An Introduction to Game Theory, Oxford University Press, 2004

 

More advanced textbooks:

  • Martin Osborne and Ariel Rubinstein,  A Course in Game Theory, MIT Press, 1994
  • Roger Myerson, Game Theory - Analysis of Conflict, Harvard University Press, 1997
  • Drew Fudenberg and Jean Tirole, Game Theory, MIT Press, 1991

Course outline

  1. Introduction and Theory of Rational Choice
  2. Representation of Games
  3. Dominance and Rationalizability
  4. Static games of complete information: pure strategy Nash equilibrium
  5. Static games of complete information: mixed strategy Nash equilibrium
  6. Dynamic games of complete information: subgame perfect Nash equilibrium
  7. Repeated games and cooperation
  8. Static games of incomplete information: Bayesian equilibrium
  9. Dynamic games of incomplete information: Perfect Bayesian equilibrium

Course material

Slides (KS) and problem sets (IK) can be downloaded in KUSSS