Lahore University of Management Sciences

Econ 233 Introduction to Game Theory

Spring 2012

Instructor Adeel Faheem
Room No. 415, CS Department
Office Hours 10:30 11-30 am (MW)
Email adeel.faheem@lums.edu.pk
Telephone
Secretary/TA Rida Ayesha
TA Office Hours
Course URL (if any)

Course Basics
Credit Hours 4
Lecture(s) Nbr of Lec(s) Per Week 2 Duration 110 minutes each
Recitation/Lab (per week) Nbr of Lec(s) Per Week None Duration NA
Tutorial (per week) Nbr of Lec(s) Per Week 1 Duration 60 minutes

Course Distribution
Core
Elective Yes
Open for Student Category Sophomores/Juniors
Close for Student Category

COURSE DESCRIPTION
Game theory helps us understand situations in which individuals interact. The focus of game theory is interdependence, situations in which an
entire group of people is affected by the choices made by every individual within that group. It provides a set of analytical tools to understand and
consequently predict behaviour in multi-person decision settings. This course introduces students to the study of this area. No prior knowledge of
the subject is assumed. It exposes students to some basic concepts of game theory and explains how these concepts can be used to model a wide
variety of game theoretic structures.

The course will be important for all students planning to take Industrial Organization and Advanced Microeconomic courses, and for those
planning to pursue graduate studies in economics and business.


COURSE PREREQUISITE(S)





Old [Microeconomics 1 ( Econ 211) , Probability/Probability and Statistics]
New [ Principles of Microeconomics AND statistics and Data Analysis)


COURSE OBJECTIVES





To understand a new subject like Game theory and its methodology.
To learn application of Game theory in economics especially the strategic behavior of economic agents like firms and consumers.







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Grading Breakup and Policies

Quizzes: 15 %
Assignments (4 assignments): 10 %
Mid Term: 35 %
Final Exam: 40 %


Examination Detail
Midterm
Exam

Yes/No: Yes
Combine/Separate: Separate
Duration: In class
Preferred Date:
Exam Specifications: Closed books and closed notes; no help sheet allowed; no formula sheet allowed; calculators allowed.

Final Exam

Yes/No: Yes
Combine/Separate: Separate
Duration: In class
Exam Specifications: Closed books and closed notes; no help sheet allowed; no formula sheet allowed; calculators allowed.


COURSE OVERVIEW
Week/ Lecture/
Module
Topics
Recommended
Readings
Session 1 Introduction to Game Theory
Session 2 First Look at Applications and Theory Chapter1 and 2
Session 3 Strategic Form and Dominant Strategies Chapter 3
Session 4 Dominance Solvability Chapter 4
Session 5 Nash Equilibrium Chapter 5
Session 6 Cournot Duopoly and Cartel Solution Chapter 6
Session 7 Quiz 1: Assignmment 1 Due
Mixed Strategies
Chapter 8
Session 8 Some Applications: War of attrition, auctions Osborne and Watson (handouts)
Session 9 Some Applications: War of attrition, auctions Osborne and Watson (handouts)
Session 10 Zero Sum Games Chapter 10
Session 11 Extensive Form and Backward Induction Chapter 11
Session 12 Quiz 2: Assignment 2 due
Subgame Perfect Analysis
Chapter 13
Session 13 Subgame Perfection contd , (Review for midterm) Chapter 13
Session 14 Mid-Term
Session 15 Finitely and Infinitely Repeated Games Chapter 14, 15 and Watson 22
Session 16 Finitely and Infinitely Repeated Games Chapter 14, 15 and Watson 22
Session 17 Finitely and Infinitely Repeated Games Chapter 14, 15 and Watson 22
Session 18 Bayesian Games Chapter 9 Osborne
Session 19 Bayesian Games Chapter 9 Osborne
Session 20 Quiz 3: Assignment 3 due
Bargaining Games
Chapter 16 Osborne
Session 21 Bargaining Games Chapter 16 Osborne
Session 22 Rationalizablity Osborne Ch. 12
Session 23 Moral Hazard and Incentives Chapter 19 (19.1, 19.2, 19.3)
Session 24 Quiz 4: Assignment 4 due
Incomplete Information
Chapter 20 (20.1)
Session 25 Incomplete Information Chapter 20 (20.2)
Session 26 Trade with incomplete information Chapter 27 (Watson)

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Session 27 Job Market signaling and reputation Chapter 29 (Watson)
Session 28 Review and Discussion

Textbook(s)/Supplementary Readings
1) Dutta, Prajit K. (1999) Strategies and Games: Theory and Practice. The MIT Press: Cambridge, Massachusetts.
Text:

2) The main text will be: Dixit, Avinash, Susan Skeath, and David H. Reiley, Jr. 2009. Games of Strategy, W.W Norton & Company, Inc.
For reference you can consult:
3) Watson, Joel. 2002. An Introduction to Game Theory
4) Osborne, Martin J. 2004. An Introduction to Game Theory. Oxford University Press.
5) Gibbons R. (1992) Game Theory for Applied Economists. Princeton University Press: Princeton, New Jersey. A bit advanced but an
excellent applied text.