Economic Theory

2020/2021

Academic Year

ENG

Instruction in English

3

ECTS credits

Delivered at:

Department of Sociology

Course type:

Compulsory course

When:

3 year, 1 module

Course Syllabus

Abstract

The theoretical grounds of game theoretical models will be also discussed, such as the idea of rational agent and the idea of connection between micro- and macro-behavior. Also the strategic behavior in the conditions of incomplete information will be studied, as well as evolutionary models and their applications in biology, economy and social sciences.

Learning Objectives

• familiarize with the theoretical apparatus and practical methods of application of game theory and decision theory in economics and social sciences

Expected Learning Outcomes

• be able to apply simple game-theoretical models in economics and social sciences
• be able to to solve game-theoretical problems and decision theory problems
• know conceptual apparatus of game theory and decision theory
• know different classes of games (in normal and extensive form, multistage games, games with imperfect information)
• know how to find Nash equilibrium in static games and games in extensive form

Course Contents

• Lecture 1. Introduction. Main concepts.
  Seminar 1. Main concepts of game theory and decision theory. Modeling social situations as games. Seminar 2. Iterated elimination of dominated strategies.
• Lecture 2. Nash Equilibrium, Probability, and Mixed strategies.
  Seminar 3. The notion of Nash Equilibrium in pure strategies. Seminar 4. Nash equilibrium in mixed strategies. Seminar 5. Cournot and Bertrand models of the duopoly. Seminar 6. The tragedy of Commons and electoral competition. Mid-term test Seminar 7. Extensive form games. Examples. Backward induction. Centipede game. Seminar 8. Subgame perfect equilibrium. Matrix method of analysis of extensive-form games.
• Lecture 3. Repeated games. Experiments with different algorithms for repeated prisoners dilemma.
  Seminar 9. Stackelberg competition. Mutually assured destruction. Seminar 10. Finitely and infinitely repeated games. Repeated prisoners' dilemma.
• Lecture 4. Evolutionary game theory and games with imperfect information.
  Seminar 11. Evolutionary stable equilibrium. Seminar 12. Games with imperfect information. Bayesian games. Signaling games.

Assessment Elements

• Class participation
• Test
• Written Exam

Interim Assessment

• Interim assessment (1 module)
  0.2 * Class participation + 0.4 * Test + 0.4 * Written Exam

Bibliography

Recommended Core Bibliography

• Mazalov, V. V. (2014). Mathematical Game Theory and Applications. Chichester, West Sussex: Wiley. Retrieved from http://search.ebscohost.com/login.aspx?direct=true&site=eds-live&db=edsebk&AN=817776
• Webster, T. J. (2014). Analyzing Strategic Behavior in Business and Economics : A Game Theory Primer. Lanham, MD: Lexington Books. Retrieved from http://search.ebscohost.com/login.aspx?direct=true&site=eds-live&db=edsebk&AN=748851

Recommended Additional Bibliography

• Gintis, H. (2014). The Bounds of Reason : Game Theory and the Unification of the Behavioral Sciences - Revised Edition (Vol. Revised edition). Princeton, New Jersey: Princeton University Press. Retrieved from http://search.ebscohost.com/login.aspx?direct=true&site=eds-live&db=edsebk&AN=714212
• Schecter, S., & Gintis, H. (2016). Game Theory in Action : An Introduction to Classical and Evolutionary Models. Princeton: Princeton University Press. Retrieved from http://search.ebscohost.com/login.aspx?direct=true&site=eds-live&db=edsebk&AN=1090910
• Vega-Redondo, F. (2003). Economics and the Theory of Games. Cambridge, UK: Cambridge University Press. Retrieved from http://search.ebscohost.com/login.aspx?direct=true&site=eds-live&db=edsebk&AN=125043