BUS-G751 Game Theory

• 7 weeks
• 1.5 credits
• Prerequisite(s): None

Game theory is the study of multi-person decision problems in which each player’s actions influence the payoffs of other players. This course provides an introduction to graduate level game theory and its applications to economics and business. We start with an overview of simple 2x2 games that many students are familiar with and then analyze simultaneous move games more generally. We then consider sequential games in which threats and promises may or may not be credible. We then show how the opportunities for cooperation can expand when games are repeated. Finally we look at the basics of games with asymmetric information. Throughout the course we use applications from economics and different business fields.

Outline

A. Simultaneous Move Games. Classic 2x2 games, Nash equilibrium, multiple equilibria, focal points, dominated strategies, reaction functions, and mixed strategies.

B. Sequential Move Games. Threats and promises, time consistency and subgame perfection.

C. Repeated Games. Folk theorem, trigger strategies, cooperation, bargaining.

D. Bayesian Games. Asymmetric information, perfect Bayesian equilibria, mechanism design, forward induction.

References

Drew Fudenberg and Jean Tirole, Game Theory, MIT Press

Robert Gibbons, Game Theory for Applied Economists, Princeton University Press

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

Eric Rasmusen, Games and Information, Blackwell Publishers.