Universidad Francisco Marroqun

Facultad de Ciencias Econmicas

July-November 2014

Course: Game Theory
Classroom: D-306
Time: Tuesday and Thursday, 11:30AM-12:50AM
Professor: Lucas Rentschler
Office phone: 2413-3269
Cell phone: 5693-3637
Skype: lucas.rentschler
Email: lrentschler@ufm.edu
Assistant: Carlos Caal
Email: ccaal@ufm.edu


Textbooks: Robert Gibbons, Game Theory for Applied Economists
ISBN: 0691003955

Joel Watson, Strategy: An Introduction to Game Theory
ISBN: 0393918386

Graham Romp, Game Theory: Introduction and Applications
ISBN: 0198775016


These textbooks have been posted on MiU in PDF form.

Course Description:

Game theory is the study of strategic interaction. That is, it is the study of choice, where
the well-being of agents may depend on the actions of other agents. In this course we
will learn to model and analyze such strategic situations, which will enable us to
understand a varied set of economic applications. Applications we will consider include
oligopoly market structures, market entry deterrence, strategic trade policy, asymmetric
information in markets, labor market signaling, time inconsistency of policy makers
(especially in central banks), rent seeking, auctions and many others. Our goal this
semester is to master the basic toolbox of strategic analysis so that each of you will be
able to apply them to your own life (e.g. wage negotiations) as well as gaining a greater
understanding of market interactions.




Course Outline:
This outline describes the game theoretic tools we will cover over the course of the
semester. To illustrate these tools we will apply them to economic applications of
interest.

1. What is a game?
a. Strategies
b. Payoffs
c. Players
2. Classification of games
a. Sequential vs. simultaneous
b. Information structures
c. Common knowledge
3. Sequential games with perfect information
4. Simultaneous move games
a. Pure strategy equilibria
b. Mixed strategy equilibria
5. Existence of equilibrium in discrete settings
6. Sequential games with imperfect information
a. Backwards induction
b. Subgame perfection
7. Games with incomplete information
a. Sequential equilibrium
b. Signaling
c. Cheap-talk
8. Repeated games
a. Finite repetition
b. Infinite repetition
c. FOLK theorems

Grading:

Your grade in this course will be calculated as follows:

Exam 1 15%
Exam 2 15%
Comprehensive Final 30%
Quiz Average 10%
Homework Average 15%
Journal Entries 15%


I reserve the right to curve the grading distribution upwards as needed.


Attendance:

Attendance is not used as part of the grading process of this class. However, students
who attend regularly will find it much easier to excel. As such, I strongly encourage you
to attend class. Please, as a courtesy to me and your fellow students, be punctual.



Homework:

There will be a weekly problem set, which will be handed out at the end of class on
Wednesday. They will be due at the beginning of class the following Wednesday. You
may work together, but each person must turn in his/her own work.

The graded homework assignments will be returned to you, with a solution set, on the
Monday after they are turned in.


Journal:

Throughout the semester, you will find an example of a subject we have covered and
analyze this example using the theory we have learned in class. For example, if we have
discussed the concept of mixed strategy Nash equilibrium, you will find a situation that
can be modeled as a game with a mixed Nash, and solve your model. Further, in each
journal entry, you will interpret your results, and explain how sensitive your findings are
to the assumption you have made.

A good journal entry will be 3-4 pages in length and provide a thorough exploration of
the example you have found. Research your entry thoroughly, and cite your sources.

When we have covered a topic for which I would like a journal entry I will announce it in
class, and the entry will be due the following week.










Exams:

There will be two midterms, and a final. The material in this course builds on itself,
meaning that comprehension of later topics requires a thorough understanding of
earlier concepts. As such, each exam will cover all the material that came before it.

The schedule for these exams is as follows:

Midterm Exam #1: September 4
th
(in class)
Midterm Exam #2: October 16
th
(in class)
Final Exam: As scheduled by the university

Quizzes:

Every class, there is 50% chance that there will be a quiz covering the reading for that
day. These quizzes are intended to ensure that you are prepared for class, and that you
are familiar with the concepts that will be covered.

Keys to Success:

Take good, well-organized, and detailed notes.
Work through as many problems as you can. Spend a good deal of time working
through the assignments.
Make sure that you are working through problems and studying each and every
week. Do not try to cram in this class.
Come in for help as soon as you have difficulties. Do not allow problems to grow
too large before coming for help.