Game Theory 2400-M2IiETG
The goal of the course is that students become acquainted with elements of game theory and auction theory. It also serves as an introduction to experimental economics as a tool to verify game theoretic models.
Experimental method in economics.
Individual decision making: preference and utility; rationality criteria and typical exceptions; choice under risk and uncertainty; dominance and minimax; expected utility theory; prospect theory as an alternative.
Introduction to game theory: the assumption of common knowledge of rationality; types of games.
Normal-form games: iterated elimination of dominated strategies; best response and Nash equilibrium—its existence and uniqueness; mixed strategies; strictly competitive games (“zero-sum games”).
Dynamic games: game trees; the notion of strategy in dynamic games; the notion of subgame-stability; non-credible threats;
Imperfect information: information sets; Bayesian equilibria; intuitive criterion.
Economic applications of non-cooperative games; market entry; R&D contests; competition in price, quantity, location; principal-agent problems; negative selection; market for lemons, signaling, screening, models with costly information search.
Auction theory: private-value and common-value auctions; first-price, second-price auctions; static vs. dynamic auctions; efficiency and income maximization; revenue equivalence theorem
Negotiation theory: Rubinstein’s model; negotiations with incomplete information; war of attrition as a model of negotiations.
Type of course
Learning outcomes
A) KNOWLEDGE
Student…
… knows how game theory may be used to model producer’s and consumer’s choices in the market. She knows practical applications of the theories and models she learns. She knows the notion of rationality, when applied to consumer’s choices and in a broader cultural context
S2A_W01; S2A_W09
… knows and understands the notion of equilibrium when applied to consumer’s choice. She knows the mathematical properties o the utility function. X2A_W02
… knows and understands the notion of equilibrium when applied to producer’s choices and the derivation of the supply function. X2A_W02
… knows experimental methods as applied to analysis of economic reality S2A_W06
… knows history of modelling choice under risk. She knows von Neumann-Morgenstern’s expected utility theory and its applications in modern economics. S2A_W01; S2A_W09
… knows measures of risk aversion and how they can be derived. X2A_W02; S2A_W06
… knows the limitations of the von Neumann-Morgenstern’s model, paradoxes of rational choice, prospect theory S2A_W09
… knows how to apply models of choice under risk.
S2A_W02; S2A_W01
… knows basic notions of game theory and understands how they may be used in modelling risk structures. S2A_W06
… knows basic results in auction theory. S2A_W06
… knows models of market failures and tools which may help reduce associated inefficiencies. S2A_W02
B) SKILLS
Student…
… is able to use the theories and models she learns to analyse real economic problems.
… is critical towards consumer theory. She is able to point at strong and weak point in theory when compared to other approaches in social sciences.
… is able to determine risk posture for typical utility functions
… is able to apply experimental methods to the study of decision-making under risk and strategic interactions.
… is able to determine which paradoxes of decision making under risk explain actual human behviors.
… is able to find equiblibria for different market structures.
C) SOCIAL COMPETENCE
The main factor affecting the development of social competence is teamwork, specifically consulting joint strategies in behavioural experiments
Student…
… is able to work in a team and to plan her work.
… is able to search for information in the literature on her own.
… is able to link theoretical knowledge with her professional development and other fields of social sciences and mathematics.
… understands the need to present game theoretic models in a popular form.
… shares knowledge and helps others to understand game theoretic issues. She is aware of the impact of social capital on performance.
… is able to communicate with her surroundings, share and defend her views, take positions on important social issues, shows rhetorical skills.
KW01, KW02, KW03, KW04, KU01, KU02, KU03, KU04, KU05, KU06, KU07, KK01, KK02, KK03
Assessment criteria
The mark is awarded based on the score on a written exam consisting of ca. three major problems.
The students are also required to show up in class and take an active part.
Bibliography
Malawski i inni (2004), Konkurencja i kooperacja. Teoria gier w ekonomii i w naukach społecznych
Rasmusen E., (2007), Games and Information: An Introduction to Game Theory,
Gibbons, R. (1992) Game Theory for Applied Economists, Princeton University Press
Watson, J. (2005), Strategy: An Introduction to Game Theory Norton, New York
Holt C. (2007), Markets, Games, & Strategic Behavior, Pearson education Inc.
Osborne, M.J.., Rubinstein, A. (1994) A course in game theory
Osborne, M. J. (2004). An introduction to game theory (Vol. 3, No. 3). New York: Oxford university press.
Krawczyk M. (red.) (2012), Ekonomia Eksperymentalna, Wolters Kluwer, Warszawa
Aumann R., Hart S. (2002) Handbook of Game Theory with Economic Applications
Camerer C. F. (2003), Behavioral Game theory, Princeton University Press
Dixit A. K., Nalebuff B. J. (2010), The art of strategy, W. W. Norton & Company.
Additional information
Information on level of this course, year of study and semester when the course unit is delivered, types and amount of class hours - can be found in course structure diagrams of apropriate study programmes. This course is related to the following study programmes:
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