Game Theory

Fall 2020

Assoc. Prof. Chris Ball

Economics Department

Email:

Office phone: +1 203 582 8745

Office Location: 4th Floor Rocky Top Student Center

QU Course Number: EC 355

Days: T,TH

Time: 3:30 pm - 4:45 pm

Location: Room TH 326

Required textbook is Strategy: An Introduction to Game Theory (Third Edition) by Joel Watson

All homework submissions, paper submissions and grading will be done via QU BlackBoard.

PART I: GAME THEORY BASICS and the NORMAL FORM

Chapter 1: Introduction
- Problems: No end-of-chapter problems to do
- Notes:
- Videos:
Chapter 2: The Extensive Form
- Problems: End-of-chapter problems: #1 - 8 (all problems)
- Notes: Download Chap 2
- Videos:
Chapter 3: Strategies and the Normal Form
- Problems: End-of-chapter problems: #1 - 7
- Notes:
- Videos:
Chapter 4: Beliefs, Mixed Strategies and Expected Payoffs
- Problems: End-of-chapter problems: #1-5
- Notes:
- Videos:
Chapter 5: General Assumptions and Methodologies
- Problems: No end-of-chapter problems to do
- Notes:
- Videos:
Chapter 6: Dominance and Best Response
- Problems: End-of-chapter problems: # 1, 4, 5
- Notes:
- Videos:
Chapter 7: Rationalizability and Iterated Dominance
- Problems: End-of-chapter problems: #1, 2, 3, 4
- Notes:
- Videos:
Chapter 9: Nash Equilibrium
- Problems: End-of-chapter problems: none
- Notes:
- Videos:
Chapter 11: Mixed-Strategy Nash Equilibrium
- Problems: End-of-chapter problems: #1, 3 - 7
- Notes:
- Videos:

Chapter 14: Details of the Extensive Form
- Problems: No end-of-chapter problems to do
- Notes:
- Videos:
Chapter 15: Sequential Rationality and Subgame Perfection
- Problems: End-of-chapter problems: #1, 2, 3, 5, 6, 7 (part (c) is optional), 11 a & b, and 12
- Notes:
- Videos:
Chapter 13: Contract, Law, and Enforcement in Static Settings
- Problems: End-of-chapter problems: #1, 2, 3, 7, 8, 9, and 11
- Notes:
- Videos:

PART II: “DYNAMIC” INTERACTION, THE EXTENSIVE FORM, and INFORMATION

Chapter 24: Random Events and Incomplete Information
- Problems: End-of-chapter problems (you should also solve these games): 1, 2, 3 and 5.
- Notes:
- Videos:
Chapter 26: Bayesian Nash Equilibrium and Rationalizability
- Problems: End-of-chapter problems: 1, 3(a), 6, 7 and 9
- Notes:
- Videos:
Chapter 28: Perfect Bayesian Equilibrium
- Problems: End-of-chapter problems: 1, 2, 3, 6, and 10.
- Notes:
- Videos:
Chapter 29: Job-Market Signaling and Reputation
- Problems: End-of-chapter problems: 1, 2, 3, and 7
- Notes:
- Videos:

Optional Material

Chapter 27: Lemons, Auctions, and Information Aggregation
- End-of-chapter problems: none.
- Prof. Ball practice problems for "simple Lemon market"
- Notes:
- Videos:
Chapter 25: Risk and Incentives in Contracting
- Problems: End-of-chapter problems: TBD
- Notes:
- Videos:

ADDITIONAL MATERIAL

Excel 2x2 Nash Solver. This is an excel sheet I made to help you check your answers. It will find pure and mixed Nash equilibria and it will identify strictly dominated strategies. Be careful though, the mixed calculations can get funky for some payoffs. So, still check your answers with pen and paper. This is a helpful tool, not a substitute for actually solving the games yourself.
Mixed Strategies - YouTube Video that's presented similar to the way we do in class. Note: I let p = prob(P2 chooses s1) and q = prob(P1 chooses s1). They switch them in this video. Otherwise, very similar to how I present it.
Another version of Harsanyi's Centipede game - YouTube Video, useful for understanding strategies and backward induction, extensive form games.
Bridge Burning and Commitment - YouTube Video, useful for extensive forms, SPE, and also understanding the key nature of strategies and commitment
Joel Watson's lectures for undergrads. The great thing is that all his notation will be the same as what we use since we follow his textbook closely.

Overview

This course aims to do two things: teach basic game theory and teach you to model.

First, in this course you should learn the basics of game theory so that you can apply it in life, in other disciplines (for example, in political science, sociology, and some areas of business), and as a foundation should you continue to graduate school. We will cover the foundations of game theory, normal/strategic form games, Nash Equilibria, extensive form games, Subgame Perfect Equilibria, games with imperfect information, and Bayesian Perfect Equilibria. In terms of applications we'll apply these to model a wide range of strategic-interactive environments and classic areas like market-entry for firms, principal-agent problems, voting paradoxes, bargaining and screening and signalling games.

Second, you will get an introduction to modelling. In the end, we will cover Game Theory as an applied economics course. We'll learn the basic game theory and then solve games and apply the concept to various strategic environments. That is, at a basic level, modelling. Only by doing this will you learn to be able to apply basic game theory in any case in your own life that you like. In one sense, it's like learning the theory of supply and demand and market-clearing equilibrium, then applying it to any market you like in real life. So, you'll learn when to analyze something as a normal form versus an extensive form game, when to apply Nash Equilibrium versus Subgame Perfect Equilibrium and so on.

You learn to do this first by learning the theory, then by practicing applying it with practice problems, then finally by applying it on your own. The first two steps are covered in standard course-structure. That is, we'll have lectures, practice problems and tests. The final step is a paper. Everyone in the class will find a topic to model, develop their own model and write it up as a short paper. These are usually 2-5 pages long.