Class schedule: MW 1:10-3:00 pm, Heady 272
Textbook (optional): Osborne, Introduction to Game Theory, Oxford University Press
Grading: ~15% GT problem sets and participation; ~85% GT final exam; Overall 603 grades are jointly determined based on your performance in GT and GE parts of the course.
This course offers an introduction to non-cooperative game theory for first-year doctoral students in Economics.
Standard micro and macroeconomic theories assume price-taking behavior: every agent takes the environment
in which she operates as given and maximizes her utility under these constraints.
However, this simplifying assumption only applies if agents are too ‘small’ to
influence the environment of other agents through their actions.
Many important economic phenomena do not fit this paradigm.
For example, when a buyer and a seller negotiate a price each of them can walk away from a deal.
In industries with a small number of dominant firms (such as the airline and aircraft industries)
the behavior of a single firm can have large impacts on the profits of its competitors. Similarly,
US import tariffs affect European manufacturers and can lead to trade wars if set too high.
Another (and much studied) example is the arms race between the Soviet Union and the US during the Cold War.
In these types of situations agents have to think strategically.
They have to take into account that their own actions influence
the payoffs of other players, that other players are aware of this interaction,
and that they adjust their own behavior accordingly (etc.)
Game theory analyzes games with strategic interactions and tells us how rational players should play such games.
During the last 40 years game theory has been successfully applied to all fields of economics,
and is being more and more heavily used in political science and sociology.
This course is intended to give you a thorough introduction to game theory
which originally emerged as a field of mathematics. You don’t know have to know a
lot of mathematics to enroll in the course because we will prove most of the results from first principles.
However, being at ease with basic probability theory and some calculus is a definite plus.
At the end of the course you should be able to analyze and solve fairly sophisticated games.
Sometimes, the standard game theoretical assumptions turn out to be too demanding for
many real-world players and actual strategies can look quite different from the predicted ones.
We will conduct a large number of in-class experiments (with real money payoffs) in order to identify
systematic deviations. Time permitting, we will also discuss recent advances in game theory which allow us
to model boundedly rational behavior.
This is a quantitative course which tries to present the basic concepts as intuitively as possible. The course
is designed to be accessible to all first year PhD students who enjoy combining conceptual thinking
and practical understanding. The course combines analytical
(lectures), experiential (exercises and game playing), interactive (discussion), peer (group assignments) and
individual (textbook reading and papers) learning.
Additional Game Theory References:
Fudenberg and Tirole, Game Theory , MIT Press, 1991.
Gibbons, Game Theory for Applied Economists , Princeton University Press, 1992.
Mas-Colell, Whinston and Green, Microeconomic Theory, Oxford University Press,1995.
Osborne and Rubinstein, A Course in Game Theory, MIT Press, 1994.
Myerson, Game Theory: Analysis of Conflict, Harvard University Press, 1997.
Camerer, Behavioral Game Theory: Experiments in Strategic Interaction, The Roundtable Series in Behavioral Economics, Princeton University Press, 2003.
In order to learn the material it is absolutely essential to do the problem sets. You are encouraged to work in groups (of up to 4 people); each person should submit their own work but list the names of group members if the assignment was completed in a group.
Final Exam date TBA.
It is Iowa State’s policy to help students with disabilities.
Please contact me and/or Disability Resources Office, 1076 Student Services Building, 294-6624.
1.   It is highly recommended that you attend all classes. Students are responsible for material covered and announcements made in class. If you cannot attend a lecture, please notify me by email in advance.
2.   When contacting me by email include “Economics 603 – Question about …” in the subject line. I will typically respond to all email inquiries within 48 hours.
3.   Feedback is appreciated at any time!
Last updated: Monday, January 9, 2013, 10:00am