Syllabus Econ 345 Games and Strategies Instructor: Ram Sewak Dubey Spring 2012 Office Hours: Mondays, Wednesdays 4:00-5:30pm Tuesdays 9:45-11:15am or by appointment Office: 225, Persson Hall, Email: [email protected],

Phone: 315-228-6242

A. Note on Office Hours: I understand that these office hours may conflict with the class schedules for many of you. This should not come in the way of learning. You are welcome to stop by outside of my office hours, if you find me in my office and I am free. B. Lecture Schedule:

TR 8:30-9:45am in 108, Alumni Hall

C. Course Description: Game theory is the study of decisions that are complicated by strategic interactions: situations where making the best choice requires taking into account the decisions being made by others. This course will present the basic concepts of game theory and apply those concepts to a variety of microeconomic topics. Some of the applications we will examine include oligopoly behavior, auctions, political elections, bargaining, and signaling models. We will also, as time permits, examine experimental evidence that sometimes confirms, but often conflicts with, the predictions from game theory. (a) Prerequisites: ECON 251, MATH 102 or MATH 316, and MATH 111 or a High School calculus course. Students should be able to take the derivatives of simple functions and understand expected value. Since game theory is essentially applied mathematics, the most important prerequisite is that you enjoy working with math. (b) Textbook: Robert Gibbons: Game Theory for Applied Economists 1992. I will also post the game theory chapters from Baldani, Bradfield, and Turner, Mathematical Economics, (BB&T) on Moodle. Any other readings will be made available on Moodle. (c) Attendance Policy: I expect you to be in class, but attendance is not counted as part of the course grade.

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D. Course Requirements and Grading: (a) Homework (Homework (20%). Homework is due in class: late homework will earn halfcredit if it is handed in prior to the next class period.) (b) Two Midterm exams (20% each). If you have an excused absence for one of the midterms then the remaining midterm will count for 30% of your grade and the final will count for 40%. (c) A short paper due by the last day of the semester. (10%) In your paper you will develop a game theory model to illustrate an article (or small set of articles) from the Economist, Wall Street Journal, New York Times, or other respectable publication. Papers should be around 5-8 pages (not including graphs, game trees, or payoff matrices). (d) Comprehensive Final Exam (30%). E. Exams: There will be two evening midterm exams and a comprehensive final exam. (a) Midterm I February 28 (Tuesday) 7-9pm (7, Persson Hall) (b) Midterm II April 12 (Thursday) 7-9pm (27, Persson Hall) (c) Final will be given at the time scheduled by the Registrar: May 7 (Monday) 9-11am (Room to be announced later) (d) Make-up exams will normally be given only if you have an academic class that conflicts with the exam time or if there are other truly exceptional circumstances. (e) Add these dates to your calendar now and let me know as far in advance as possible about potential conflicts. (f) You must take at least one midterm and the final to pass the course. F. Academic Honor Code: All students are required to abide by the Colgate University Academic Honor Code in all the exams. G. Accommodation: If you feel you may need an accommodation based on the impact of a disability, please contact me privately to discuss your specific needs. If you have not already done so, please contact Lynn Waldman, Director of Academic Support and Disability Services. Lynn coordinates reasonable accommodations for students with documented disabilities. Her office is in the Center for Learning, Teaching and Research (315-228-7375). H. Course Outline: I. Introduction to Game Theory (weeks 1-2) A. Strategic Interactions: Let’s Play Some Games! B. Basic Concepts: 1. Static Games vs. Dynamic (Sequential) Games 2. Extensive Form vs. Strategic Form 3. Ways of Thinking about Information

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II. Static Games in Strategic Form (weeks 2-6) Chapter 1 in Gibbons and Chapters 17, 18 in BB&T A. B. C. D. E.

Dominated Strategies Nash Equilibrium in Games with Discrete Strategy Sets Nash Equilibrium in Games with Continuous Strategy Sets Nash Equilibrium in Mixed Strategies Some Key Applications in this Section: 1. Cournot Duopoly 2. Bertrand Duopoly 3. Electoral Games 4. Commons Problems 5. The Hawk-Dove Game

III. Dynamic Games in Extensive Form (weeks 6-10): Chapter 2 in Gibbons and Chapters 19 and 20 in BB&T A. B. C. D.

Backward Induction and Subgame Perfect Equilibrium Two-Stage Games Repeated Games Some Key Applications in this Section: 1. Bargaining 2. Trade Policies 3. Repeated Prisoners Dilemmas

IV. Games with Private/Incomplete Information (weeks 10-13) Chapters 3 and 4 in Gibbons A. B. C. D.

Modeling Private Information: Bayesian-Nash Equilibrium Static Games with Incomplete Information Signaling Games Some Key Applications in this Section: 1. Information Sharing in Duopoly 2. Auctions 3. Education and the Job Market 4. Product Quality

V. Behavioral Game Theory (week 14) VI. Other Topics (as time permits) Final exam will be cumulative.

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