Game Theory, Spring 2011
Young Joon Park
HSBC School of Business
Peking University
Office: C-403
Game Theory
Course Description:
We cover main ideas and techniques of game theoretic analysis. The course introduces the basic intuition of game theory and its application as well as the consequences of new development of behavioral assumptions. The goals of the course are to provide students with a foundation to game theory that helps thinking strategically and to let them apply its intuition to the real world examples.
Prerequisites:
Basic knowledge of intermediate microeconomics is required.
It is recommended that you have also taken Advanced Microeconomics I and undergraduate Game Theory course.
A basic background of mathematics and (social) psychology is helpful but not necessary.
Logistics:
Professor: Young Joon Park
Office Hours: 1:30-3:30 on Tuesday or by appointment
Lectures: The class will meet regularly on Tuesdays and Fridays 10:30-12:20
Textbook:
The course is divided into two parts.
In the first 5-6 weeks, we will review basic analytical tools in strategic settings. During the remaining part, we will extend these analytical tools to behavioral game theory which applies recently proposed behavioral assumptions.
Although there is no assigned textbook for the class, there are several good readings.
[1] Zhiyong Tu, Game Theory, Peking University Press, 2009.
[2] Joel Watson, Strategy: An Introduction to Game Theory, Norton, 2008.
[3] Colin F. Camerer, Behavioral Game Theory: Experiments in Strategic Interaction, Princeton, 2003.
[4] Nick Wilkinson, “An Introduction to Behavioral Economics”, Palgrave Macmillan, 2008.
[5] Colin F. Camerer, George Loewenstein, and Mattew Rabin, editors, Advances in Behavioral Economics, Princeton, NJ: Princeton University Press, 2003.
[6] John H. Kagel and Alvin E. Roth, The Handbook of Experimental Economics, Princeton, 1995
[7] Mas-Colell, A., M Whinston, and J. Green, Microeconomic Theory, Oxford University Press, 1995.
For the first part, you may consult any game theory textbook (including [1] or [2]). For the second part, [3] is a good textbook that concentrates on behavioral game theory topics. [4] is a good general textbook that broadly covers various behavioral topics. [5] and [6] are collection of seminal papers. You can also easily find chapters of game theory in most graduate microeconomic textbooks like [7].
Grading:
Your grade will depend on three kinds of assignments and one optional term paper:
1) Midterm Exam (35%)
2) Final Exam (50%),
3) Attendance and class participation (15%)
Both exams will be held during the class. The final exam is cumulative.
Attendance will be marked periodically.
Class participation will be evaluated by the in-class experiment.
Problem Sets:
I will give you several problem sets that are not going to be graded.
Game theory can be complicated and abstract. You will not understand the material by just coming to class. Game theory only can be learned well through practice, so it is important that you work through the examples and spend time solving problems.
The purpose of the problem sets is to help you check your understanding of the materials. It will also be handy in preparing for the exams because some of the exam questions will be similar with those in the problem sets.
You will also get the answer keys to check your understanding.
Academic Honesty:
I take violations of academic honesty seriously. Any act of academic dishonesty (eg. cheating or plagiarism) will be reported to the dean, will lead to a failing grade in the course, and possibly cause more serious consequences.
(Very Tentative) Schedule:
The schedule is tentative and due to changes.
The chapters and reading materials are provided for your reference.
Week 1 Introduction and basic concepts of Game Theory
[2] Chapter 1, 2, 3, 4, 5
[7] Chapter 7
Week 2 Analysis of Static Games
[2] Chapter 6, 7, 9, 11
[7] Chapter 8 Section A-D
Week 3 Analysis of Dynamic Games and Equilibrium Refinement
[2] Chapter 14, 15, 18, 19, 22
[7] Chapter 9
Week 4 Games with Incomplete Information
[2] Chapter 24, 28
[7] Chapter 8 Section E
Week 5 Asymmetric Information
[2] Chapter 25, 27, 29
[7] Chapter 13, 14
Week 6 Introduction to Behavioral Game Theory
[3] Chapter 1, “Introduction”; Appendix 1.1, “Basic Game Theory”; and Appendix 1.2, “Experimental Design”
[5] Chapter 13, Colin F. Camerer, “Behavioral Game Theory: Predicting Human Behavior in Strategic Situations”
- Richard H. Thaler, “From Homo Economicus to Homo Sapiens”, Journal of Economic Perspectives, 2000, vol. 14.
- Matthew Rabin, “Psychology and Economics,” Section 2, Journal of Economic Literature, March 1998.
- Stefano DellaVigna, “Psychology and Economics: Evidence from the Field,” Section 2.3 Journal of Economic Literature, June 2009.
Week 7 Survey of experiments on Game Theory
[3] Chapter 2, Dictator, Ultimatum and Trust game
- James Andreoni, Marco Castillo and Ragan Petrie, "What do Bargainers' Preferences Look Like? Exploring a Convex Ultimatum Game." American Economic Review, 93(3), June 2003, 672-685.
Week 8 Social Preference
[5] Chapter 9, Ernst Fehr and Klaus M. Schmidt, “A Theory of Fairness, Competition, and Cooperation”
[5] Chapter 10 Matthew Rabin, “Incorporating Fairness into Game Theory and Economics”
- Joel Sobel, “Interdependent Preferences and Reciprocity” Journal of Economic Literature, June 2005
- Ernst Fehr and Klaus M. Schmidt, “The Economics of Fairness, Reciprocity and Altruism – Experimental Evidence and New Theories,” in Handbook of the Economics of Giving, Altruism and Reciprocity, Edited by S. Kolm and J.M. Ythier. July 2006, North Holland
Week 9 Initial Responses to Games
[5] Chapter 12, Vincent P. Crawford, “Theory and Experiment in the Analysis of Strategic Interaction”
[3] Section 4.1, Unstructured Bargaining; 4.2, Structured Bargaining; Chapter 5, Dominance-Solvable Games; and Chapter 7, Coordination
- Rosemarie Nagel, “Unraveling in Guessing Games: An Experimental Study,” American
Economic Review 85 (1995), 1313-1326
- Miguel Costa-Gomes and Vincent Crawford, “Cognition and Behavior in Two-Person Guessing Games: An Experimental Study,” American Economic Review 96 (December 2006), 1737-1768
- Camerer, Colin, Ho, Teck-Hua and Chong, Juin Kuan, “A Cognitive Hierarchy Model of Games,” Quarterly Journal of Economics 119 (2004), 861-898;
- Vincent Crawford and Nagore Iriberri, “Fatal Attraction: Focality, Naivete, and Sophistication in Experimental Hide-and-Seek Games,” American Economic Review, 97 (2007),
- Alvin Roth, Vesna Prasnikar, Masahiro Okuno-Fujiwara, and Shmuel Zamir, “Bargaining and Market Behavior in Jerusalem, Ljubljana, Pittsburgh, and Tokyo: An Experimental Study,” American Economic Review 81 (1991), 1068-1095.
- Judith Mehta, Chris Starmer, and Robert Sugden, “The Nature of Salience: An Experimental Investigation of Pure Coordination Games,” American Economic Review 84 (1994), 658- 674.
- Vincent Crawford, Uri Gneezy, and Yuval Rottenstreich, “The Power of Focal Points is Limited: Even Minute Payoff Asymmetry May Yield Large Coordination Failures,” American Economic Review, 98 (2008)
- Vincent Crawford “Adaptive Dynamics in Coordination Games,” Econometrica 63 (January 1995), 103-143: Section 2 (pp. 106-109, especially footnote 8);