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Hands-On Microeconomics: a primer in Game Theory.
Rating: 4.4 out of 5(46 ratings)
424 students
Created byLuigi Ventura
Last updated 1/2020
English

What you'll learn

  • Students will learn the main concepts in non cooperative game theory, and will learn how to use them to find equilibria for actual games.
  • Students will get to know very well some battle horse games, such as matching pennies, the prisoners' dilemma, the battle of sexes and the game of chicken.
  • Students will learn to use equilibrium concepts such as that of Nash equilibrium, and that of subgame perfect equilibrium for sequential games.
  • Students will be taken to make comparisons between game theoretic concepts and some market forms.
  • Students will be asked to apply the concepts learned in class to some end of class exercises.

Course content

1 section • 21 lectures • 2h 27m total length

  • Introduction4:00
  • Components of a game5:24

    In this class the main components of a game will be illustrated, by looking at a first game matrix, that of the prisoners' dilemma.

  • The Prisoners' dilemma5:24

    In this class, the prisoners' dilemma will be introduced in detail.

  • Defining an equilibrium5:04

    This class will introduce the notion of equilibrium, and in particular that of Nash equilibrium in pure strategies.

  • Finding an equilibrium: the Prisoners' dilemma6:30

    In this class we'll find a Nash equilibrium for the prisoners' dilemma.

  • The battle of sexes5:38

    This class introduces another well known game, the battle of sex, and finds its two Nash equilibria.

  • The game of matching pennies4:35

    For this "zero sum" game, matching pennies, we'll discover there does not exist any nash equilibrium in pure strategies. We need, therefore, to enlarge our notion of equilibrium.

  • Nash equilibrium in mixed strategies4:16

    This class introduces the notion of mixed strategies Nash equilibria.

  • Finding a Nash equilibrium in mixed strategies for the game of matching pennies22:51

    Step by step, we compute an equilibrium in mixed strategies for the game of matching pennies.

  • Interpreting mixed strategy equilibria13:41

    This class offfers an interpretation for mixed strategy equilibria, and computes a Nash equilibrium in mixed strategies for the battle of sexes.

  • No mixed strategy equilibrium for the prisoners' dilemma4:29

    This class shows that no mixed strategy Nash equilibrium exists in the case of the prisoners' dilemma.

  • A very dangerous game: the game of chicken13:08

    This class introduces the "game of chicken" and finds pure and mixed strategy equilibria for it. How likely is a crash to happen?

  • Refining Nash equilibria by eliminating dominated strategies7:55

    This class introduces the notion of dominated strategies, and explains how to reduce the set of Nash equilibria by eliminating such strategies.

  • An example of iterated elimination of dominated strategies7:44

    In this class we reduce the set of equilibria in a game by iteratedly eliminating (weakly) dominated strategies.

  • The prisoners' dilemma: an equilibrium in dominant strategies2:05

    This class explains why the pure strategy Nash equilibrium for the prisoners' dilemma is so strong, by showing it is an equilibrium in dominant strategies.

  • Games in extensive forms3:33

    This class introduces a new way of representing games, the extensive form.

  • Subgame perfect equilibria7:10

    This class introduces the concept of subgame perfect equilibrium for sequential games. One such equilibrium is computed for a simple game, and compared to the equilibria of the corresponding simultaneous game.

  • Repeated games5:11

    In this class we discuss the notion of repeated games, and illustrate its possible implications for the prisoners' dilemma.

  • Games and market regimes8:10

    In this class we introduce Cournot duopoly, as we want to show that its equilibrium is in fact an instance of a Nash equilibrium.

  • Cournot duopoly and the prisoners' dilemma5:10

    This class shows that a Cournot equilibrium is in fact a Nash equilibrium, and casts the relationship between a Cournot and a Cartel equilibrium in the framework of the prisoners' dilemma.

  • Sequential games and Stackelberg duopoly5:28

    This class shows that the equilibrium of a Stackelberg duopoly is just an instance of a subgame perfect equilibrium for a sequential game.

Requirements

  • For most of the course, just simple algebra and very basic notions of calculus for some applications.
  • Very basic notions of statistics (in particular, the concept of weighted average).

Description

This course introduces the main concepts of non cooperative game theory by using a hands-on approach, i.e. by presenting, discussing and solving examples.

Some well known normal form games, such as matching pennies, the prisoners' dilemma, the battle of sexes, and the game of chicken, will be discussed to introduce and apply concepts like Nash equilibrium in pure and mixed strategies, the elimination of dominated strategies, and repeated games.

Sequential games will also be described, by using an extensive form based on game trees. The notion of subgame perfect equilibrium will consequently be discussed.

Finally, some game tehoretical concepts will be used to describe the outcome of Cournot and Stackelberg duopoly, and the instability of a cartel.

Who this course is for:

  • First and second year students in Economics (Major and Minor).
  • Students in social sciences, wishing to get basic hands-on notions of non coopeerative Game Theory.
  • Managers wishing to get some insight into game theoretical concepts, and learn to think more strategically.

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