Economics 20700
Introduction to Game Theory

Spring 2018. Instructor: Roger Myerson (office hours Mondays 1:00-3:30pm and by appointment).

Prerequisite: Econ 20100. (Students should know how to differentiate a polynomial, but further mathematics preparation is not required for this course.)
The class size is constrained by the size of the room. No promises about pink slips to enroll unregistered students can be made before the first class. In the second week of the term, if there is space in the room then some pink slips may be signed. There is no "waiting list" for this course.

Course description

This course introduces students to the basic ideas and applications of game theory. Topics include models of games in extensive and strategic form, equilibria with randomization, signaling and beliefs, reputation in repeated games, bargaining games, investment hold-up problems, mediation and incentive constraints.

Course requirements

The course grade will be based on homework problem sets, a midterm exam, and a final exam. Homework is graded on basis of effort only. Groups of up to five students who have worked together on a homework assignment may hand in the assignment as a group.
The midterm is planned for 5:00-7:00pm on Thursday evening Apr 26 in Saieh 021.
The final exam will be given in the last class meeting on Wednesday morning May 30.

Required text

Martin Osborne, An Introduction to Game Theory, Oxford U. Press (2004).

Other references:

  • Robert Gibbons, Game Theory for Applied Economists, Princeton U. Press (1992).
  • David Kreps, Game Theory and Economic Modelling, Oxford (1990).
  • Thomas Schelling, Strategy of Conflict, Oxford U. Press (1960) [ch 3 is Journal of Conflict Resolution 1:19-36 (1957)].

Roger Myerson:

  1. "Analysis of Incentives in Bargaining and Mediation" in H. P. Young, Negotiations Analysis, U Michigan (1991).
  2. "Utility Theory" chapter in Probability Models for Economic Decisions.
  3. "Learning from Schelling", "Nash equilibrium and the history of economic theory".
  4. "Perspectives on Mechanism Design in Economic Theory".
  5. Other notes.

Homework assignments [answers]

Course outline

  1. Strategic games (without randomization): dominated strategies and Nash equilibria. Osborne chs 1,2, and notes p1.
  2. Nash equilibria in randomized strategies. Osborne ch 4.
  3. Extensive games with perfect information. Osborne ch 5.
  4. More on equilibria. Osborne ch 3 and ch 6, and notes pp2-3 on computing equilibria.
  5. Simultaneous moves and chance. Osborne sections 7.1, 7.6, and notes p4 on the attrition game.
  6. Repeated games. Osborne, ch 14,15, and notes pp6-10.
  7. Extensive games with imperfect information, beliefs and sequential rationality. Osborne ch 10.1-10.5, 7.7, notes p15.
  8. Bayesian games where players have different information. Osborne ch 9, and notes pp11-14 on increasing strategies.
  9. [Bargaining and signaling. Notes pp16-17, reading on mediation pp 67-79, mechanism design.]