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JOHN CABOT UNIVERSITY
COURSE CODE: "EC 327"
COURSE NAME: "Game Theory"
SEMESTER & YEAR:
Spring 2022
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SYLLABUS
INSTRUCTOR:
Francesco Ruscitti
EMAIL: [email protected]
HOURS:
MW 4:30 PM 5:45 PM
TOTAL NO. OF CONTACT HOURS:
45
CREDITS:
3
PREREQUISITES:
Prerequisites: EC 201 and MA 208
OFFICE HOURS:
After class and by appointment. To schedule an appointment, just approach me in class or send me an email beforehand
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COURSE DESCRIPTION:
Situations in which the outcome of your own decisions depends also upon what others do are pervasive in everyday life. Game Theory focuses on the study of strategic interactions, which occur if the payoff (e.g., utility or profit) to an agent depends not only on her own decisions but also on the decisions made by others. In the presence of strategic interactions, choosing an ‘optimal’ course of action requires taking other agents’ behavior and beliefs into account. This is an introductory course in Game Theory which develops the basic tools and concepts necessary to analyze such interactions and understand how rational agents should behave in strategic situations. In recent years, game theoretic methods have become central to the study of networks (e.g, financial networks) and social interactions. In this course they are used to analyze such economic and political issues as oligopoly, the problem of the commons, auctions, bank runs, collusion and cartels, the conduct of monetary policy, bargaining, global warming, competition among political parties, arms races, negotiations and conflict resolution (e.g., contested resources and territorial disputes). Emphasis is placed on applications, practical understanding and a tools-oriented approach. The topics will be presented through a combination of abstract theory and many applied examples.
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SUMMARY OF COURSE CONTENT:
Note: This is a preliminary draft of the syllabus. When the semester starts, I will post the official version of the syllabus (including all of my policies, assessment method, and the dates of the exams) that will be much more detailed than this draft.
Note: Principles of Microeconomics and basic Statistics are both prerequisites for this course. Proficiency with algebra, formal models and abstract reasoning, and geometric analysis is highly recommended.
Normal-form games, various
concepts of strategy, Nash equilibrium, and related applications. Dynamic
games, extensive-form representation of games (game tree) and related
applications. Subgame perfection, backward induction method and related
applications. The prisoner’s dilemma, finitely and infinitely repeated games
and cooperation, with related applications. A Game Theory guide to negotiations
and conflict resolution with real-life examples. Static games of incomplete
information and related applications. The applications examined
include oligopoly behavior, the median and generalized voter model,
arbitration, the problem of the commons (use of common property resources),
global warming, nuclear deterrence, business partnerships, bargaining, bank
runs, tournaments, collusion, time-consistent monetary policy, auctions, the
problem of climate change, doping in sports, arms races, territorial disputes
etc.
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LEARNING OUTCOMES:
Upon successful completion
of this course,
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Students should be able to formalize a strategic situation as a
well-defined game, and select appropriately a solution concept to derive
implications about expected behavior.
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Students should be able to understand the way in which
game theoretic models can be applied to a variety of real-world scenarios in
economics and in other areas.
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Students should be able to apply the prisoner’s dilemma game (and other types of
games) to a variety of real-world conflicts, and employ game theoretic methods to develop strategies
for policy analysis or in response to competitors’ moves. They should learn how
‘cooperation’ to get to a mutually beneficial outcome can be attained and
enforced.
More in
general, with reference to the learning outcomes (LOS) of the Economics and
Finance major, students will:
LOS 1: Build a solid understanding of and knowledge
base in microeconomics and macroeconomics.
LOS 2: Develop critical-thinking
skills and learn to apply economic analysis in order to understand economic
events and everyday problems.
LOS 6: Master solid communication skills in order to formulate a
well-organized argument and communicate effectively in written and graphical
form about specific economic and financial issues.
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TEXTBOOK:
Book Title | Author | Publisher | ISBN number | Library Call Number | Comments | Format | Local Bookstore | Online Purchase |
Strategy: An Introduction to Game Theory. Third edition, 2013 | Joel Watson | W.W. Norton & Company | ISBN-13: 978- 0393918380 ISBN-10: 0393918386 | | | | | |
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REQUIRED RESERVED READING:
RECOMMENDED RESERVED READING:
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GRADING POLICY
-ASSESSMENT METHODS:
Assignment | Guidelines | Weight |
Midterm exam | In-class closed-book exam. Open-ended questions and numerical problems. Questions will be analytical in nature and students will be required to perform simple but formal proofs. Sample questions will be posted. | 30% (tentative) |
Two Problem sets (tentative) | To be handed in on the due date. Late submissions will not be accepted. Numerical problems and open-ended questions. Students are encouraged to form study groups and work together on the homework assignments, though each student must turn in her/his own write-up | 35% (tentative) |
Final exam (comprehensive). It will cover all the material taught throughout the course | In-class closed-book exam. Open-ended questions and numerical problems. Questions will be analytical in nature and students will be required to perform simple but formal proofs. Sample questions will be posted. | 35% (tentative) |
-ASSESSMENT CRITERIA:
AWork of this quality directly addresses the question or problem raised and provides a coherent argument displaying an extensive knowledge of relevant information or content. This type of work demonstrates the ability to critically evaluate concepts and theory and has an element of novelty and originality. There is clear evidence of a significant amount of reading beyond that required for the course. 93-100:A. 90-92.99:A- BThis is highly competent level of performance and directly addresses the question or problem raised.There is a demonstration of some ability to critically evaluatetheory and concepts and relate them to practice. Discussions reflect the student’s own arguments and are not simply a repetition of standard lecture andreference material. The work does not suffer from any major errors or omissions and provides evidence of reading beyond the required assignments.86-89.99:B+. 83-85.99:B. 80-82.99: B-
CThis is an acceptable level of performance and provides answers that are clear but limited, reflecting the information offered in the lectures and reference readings. 75-79.99:C+. 70-74.99:C. 65-69.99:C-
DThis level of performances demonstrates that the student lacks a coherent grasp of the material.Important information is omitted and irrelevant points included.In effect, the student has barely done enough to persuade the instructor that s/he should not fail.60-64.99:D+. 55-59.99:D. 50-54.99: D-
FThis work fails to show any knowledge or understanding of the issues raised in the question. Most of the material in the answer is irrelevant.Below 50: F
-ATTENDANCE REQUIREMENTS:
Game Theory can prove somewhat challenging. To do away with math and render the material accessible and enjoyable to non-specialists, I will have to properly adapt and manipulate the analyses presented in the textbook. Moreover, I tend to deviate from the textbook’s treatment of the subject matter and I also do problems and proofs in class that I put on the exams. Therefore, taking notes in class is necessary. Attendance is basically indispensable. If you miss my lectures, you get lost and that would undermine your performance. I really encourage you to attend every single lecture. If you are not committed to working hard and attending all lectures, I am afraid this is not the right course for you.
EXAMS AND POLICIES ON ABSENCES: At the beginning of the semester, I will post the official version of the syllabus (very detailed) with the exact exams dates and all of my policies. There are NO make-up for missed exams. If you miss a midterm exam due to a compelling reason (e.g., you are sick), I want you to notify me ahead of time (if possible) and I will surely ask you to provide me with a formal justification for your absence. You have to prove your claim about the cause of your absence. If I deem the justification is formal and merits consideration, then I would let you take a make-up exam.
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ACADEMIC HONESTY
As stated in the university catalog, any student who commits an act of academic
dishonesty will receive a failing grade on the work in which the dishonesty occurred.
In addition, acts of academic dishonesty, irrespective of the weight of the assignment,
may result in the student receiving a failing grade in the course. Instances of
academic dishonesty will be reported to the Dean of Academic Affairs. A student
who is reported twice for academic dishonesty is subject to summary dismissal from
the University. In such a case, the Academic Council will then make a recommendation
to the President, who will make the final decision.
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STUDENTS WITH LEARNING OR OTHER DISABILITIES
John Cabot University does not discriminate on the basis of disability or handicap.
Students with approved accommodations must inform their professors at the beginning
of the term. Please see the website for the complete policy.
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SCHEDULE
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TOPICS AND TENTATIVE
SCHEDULE
The list and schedule of the topics covered is tentative and might be subject to change. Moreover, it is possible that we will not have time to study some of the topics mentioned below. Details will be provided in class.
Weeks
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Topics
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Recommended reading assignments
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Exams dates
and topics covered
(TBA in advance)
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STATIC GAMES OF COMPLETE INFORMATION
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Weeks 1,2,
3, 4
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Normal
form representation of games; iterated elimination of dominated strategies;
motivation
and definition of Nash equilibrium;
applications:
duopoly, arbitration, the problem of the commons, the median voter model,
auctions and the global warming model.
Cursory
introduction to mixed strategies and its interpretation (e.g., evolutionarily
stable strategies etc.).
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Watson:
Chapters 1, 3, 7, 9, 10, 11.
Gibbons :
Chapter 1.
C. D.
Aliprantis et al.: Chapter 2 (optional but very useful supplementary reading).
Applications in C.D. Aliprantis et al., chapter 2: the median voter and the
use of common property resources model, the second price auctions model, and
the global warming model.
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SEQUENTIAL GAMES OF COMPLETE INFORMATION
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Weeks 5,
6, 7
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Extensive-form
representation of games; subgame-perfect Nash equilibrium; Perfect
information: backward induction method;
applications:
wages and employment in a unionized firm, sequential bargaining, nuclear
deterrence, a business partnership game.
Two-stage
games with imperfect information: subgame perfection; applications: bank
runs.
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Watson:
Chapters 2, 14, 15.
Gibbons :
Chapter 2.
C. D.
Aliprantis et al.: Chapter 4 (optional but very useful supplementary reading).
Applications in C.D. Aliprantis et al., chapter 4: nuclear deterrence and a
business partnership game; chapter 7: two-person sequential bargaining.
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REPEATED GAMES
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Weeks 8,
9, first half of week 10
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The
prisoner’s dilemma game as a stage game: cooperation vs. defection;
finitely
repeated games;
infinitely
repeated games;
applications:
collusion and cartels, time consistent monetary policy.
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Watson:
Chapters 22, 23.
Gibbons :
Chapter 2.
Lecture
notes.
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GAME THEORY, POLICY-MAKING, NEGOTIATIONS, AND
CONFLICT RESOLUTION
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Second
half of week 10, and weeks 11, 12, and 13
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The
prisoner’s dilemma game as a framework for negotiation theory;
real-life
applications and policy-making: the problem of climate change, doping in
sports, arms races, dismantling nuclear weapons, reducing greenhouse gases
emissions.
The
chicken game as a framework for negotiations theory;
Real-life
applications: contested resources and territorial disputes. Ways to enforce
the preferred equilibrium.
Bargaining
games: the Rubinstein bargaining model as a framework for negotiations
theory;
Real-life
applications: e.g., a certain country bargains with another country over the
price for the supply of natural gas.
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Watson: Chapters 18,
19.
Lecture notes.
Hal Varian: chapters
29 and 30.
Gardiner: A perfect
moral storm.
Oye: Explaining
cooperation.
Dietz, Ostrom,
Stern: The struggle to govern the commons.
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STATIC GAMES OF INCOMPLETE INFORMATION
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Week 14
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Bayesian
games and Bayesian Nash equilibrium;
Applications:
auctions.
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Watson:
Chapters 24, 26.
Gibbons :
Chapter 3
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