Introduction to Game Theory (21118)

Department/Area of Study: degree in International Business Economics
Course: first
Term: second
Number of credits ECTS: 6
Hours dedicated by students : 150
Language: Catalan
Professor: Manel Baucells

 

1. Course description

• Objectives: The objective of the course is to provide an introduction to the Game Theory. The Game Theory is a method to analyze how to make choices when others are also making choices at the same time. It is not about winning in table games or playing card. Instead, Game Theory is about how to think about when fixing prices, or how prepare a negotiation, or understanding the difficulties of group cooperation, or where to locate a company, or what is the role of incentives in big corporations, among many other topics. Game theory allows you to calculate the possible advantage of moving first, or the credibility of threats, the strategic importance of having a last encounter, and the mechanisms to maintain cooperation alive. Rather than learning new things, students will learn to think strategically, a skill that can only be mastered with lots of practice.
• Applications: Most of the applications that we will cover will be in the area of economics and management. However, the theory has been successfully applied to sociology, biology, political science and many other fields.
• Requirements: The course takes a deeper look at some of the topics already introduced in Introduction to Economics. Game theory allows the students to make objective and rigorous theoretical analysis of specific economic situations. The previous knowledge required to follow this class are divided into two parts:
  • Knowledge of basic mathematics: Algebra, Functional Analysis, Probability, Optimization. Most of this knowledge is basic, and students have acquired it before University. Other parts they have learned during the first term at the University in the courses of Mathematics and Data Analysis.
• Knowledge of economics: Though not obligatory the basic knowledge acquired during the course Introduction to Economics offers an interesting basis for the Game Theory course. In Introduction to Economics students are introduced to the process of formalizing economic phenomena, a process that in the Game Theory course is extended to situations of strategic interaction.

 

2. Competences to be attained

General competences	Special competences
Instrumental Ability to synthesize Skills to manage information Abstract thinking Adaptation and clear understanding of the ideas  Interpersonal Ability to work in teams Ability to criticize  Systemic Creativity (ability to generate new ideas) Independence (ability to work independently)	• Analysis of rational decision models • Knowledge of economic reality • Ability to apply basic mathematical concepts of Game Theory to the economy • Analysis of situations from the perspective of strategic interaction.



3. Contents

            1. Decision theory

            2. Sequential games with perfect information

            3. Simultaneous games: dominance and best response

            4. Nash equilibrium

            5. Nash equilibrium: mixed strategies

            6. Nash equilibrium: infinite sets of strategies

            7. Sequential games without perfect information: perfect equilibrium in subgames

            8. Repeated games

            9. Games with incomplete information about the opponents' objectives

4. Evaluation

• Continued Obligatory Assessment:

a)      Experiments: Before the class sessions or the seminars, students have to participate in experiments using the Global Campus. Experiments consist in acting as a player in a game theoretic situation, and playing agains the rest of the class. Experiments are evaluated exclusively on the bases of the remunerations obtained during the game. 

b)      Practical exercises: solving problem sets and practical cases for the classes and seminars. Attendance to the seminar is obligatory. Missing more then two seminars will automatically result in a fail grade. Seminar exemptions can be granted only for medical reasons.

c)      Tests: At the end of each seminar session there is a brief test-type exam checking the work carried out during the week.

• Final Obligatory Evaluation: final exam

Relative weight for each activity:

• Experiments                                                               10%
• Test and seminar participation                                       20%
• Exercises and practical cases                                        10%
• Final exam                                                                  60%

The evaluation in September will follow the same pattern used in June. There will be a minimum grade of 4 / 10 in the final to pass the course.

 

5. Bibliography and didactic materials:

5.1. Basic bibliography

Robert Gibbons, First course in Game Theory (Un primer curso de Teoria de Juegos), Antoni Bosch, Barcelona, 1992

5.2. Additional bibliography

Avinash K. Dixit y Barry J. Nalebuff, Thinking strategically (Pensar estratégicamente), Antoni Bosch, Barcelona, 1992

5.3. Didactic Recourses

For each of the nine chapters, there is an important set of didactic material that will be available every week in the Global Campus.

• Experiments through the Internet
• Exercises and problems
• Practical cases

• PDF version of the class presentations with the core concepts of the theoretical classes

6. Methodology

During the course the following activities will be carried out

a)      Participation in internet experiments where students take decisions in a context of strategic interaction. Previous theoretical knowledge is not required.

b)      Theoretical sessions in a big group to introduce the concepts and their basic applications. Theoretical concepts are employed to discuss the behavior observed in the experiments.

c)      Seminar sessions in a small group where different concepts introduced during the course are discussed in an interactive way.

7. Outline

№	Week	Theory	Seminar
1.	From 10 to 14 January	Decision Theory	There is no
2.	From 17 to 21 January	Sequential games with perfect information	There is no
3.	From 24 to 28 January	Simultaneous games: dominance and  best response	Decision theory and sequential games with perfect information
4.	From 31 January to 4 February	Nash equilibrium	Simultaneous games: dominance and  best response
5.	From 7 to 11 February	Nash equilibrium: mixed strategies	Nash equilibrium
6.	From 14 to 18 February	Nash equilibrium: infinite sets of strategies	Nash equilibrium: mixed strategies
7.	From 21 to 25 February	Sequential games without perfect information: perfect equilibrium in subgames	Nash equilibrium: infinite sets of strategies
8.	From 28 February to 4 March	Repeated games	Sequential games without perfect information: perfect equilibrium in subgames
9.	From 7 to 11 March	Games with incomplete information on opponents' objectives	Repeated games
10.	From 14 to 18 March	Global overview of the course	Games with incomplete information on opponents' objectives