AØKA08005U  Microeconomics III

Volume 2016/2017

MSc programme in Economics - mandatory course at first semester - if not taken at the BSc programme in Economics

BSc programme in Economics - prioritized elective at the 3.year


This course furthers the introduction of game theory, non-cooperative as well as cooperative, and its applications in economic models. The student who successfully completes the course will learn the basics of game theory and will be enabled to work further with advanced game theory. The student will also learn how economic problems involving strategic situations can be modeled using game theory, as well as how these models are solved. The course intention is that the student becomes able to work with modern economic theory, for instance within the areas of industrial organization, macroeconomics, international economics, labor economics, public economics, political economics and financial economics.

In the process of the course the student will learn about

    Static games with complete information,

    Static games with incomplete information,

    Dynamic games with complete information,

    Dynamic games with incomplete information,

    Basic cooperative game theory.

The first part of the course is devoted to static games with complete information. This part of the course extends the initial treatment of the subject from Microeconomics B (Mikroøkonomi B). The concept of a normal form game and solution concepts such as dominance and Nash Equilibrium are reintroduced in a formally rigorous way. Students will also study a variety of economic applications of the theory. Finally, they will look more deeply into the theory of static games with complete information by studying mixed strategies and mixed-strategy Nash equilibria, and discussing equilibrium existence.

The second part of the course extends the treatment of dynamic games with complete information. The students will learn this theory in a more rigorous way and discuss various economic applications. The students will then study games with imperfect information and repeated games. They will be introduced to extensive form games, and will learn about the relevant refinement of the Nash equilibrium concept: subgame-perfect Nash equilibrium. Again, the theory will be illustrated by economic applications.

In the third part of the course the students will study simultaneous games of incomplete information. They will learn about the concept of Bayesian Nash equilibrium and apply their knowledge to different kinds of auctions, mechanism design problems, and other applications.

The fourth part of the course is devoted to dynamic games of incomplete information. The students will analyze the implications of introducing sequential moves into the games with incomplete information. They will gain knowledge of the Perfect Bayesian Equilibrium and its refinements, and will apply the theory to signaling games and other relevant economic problems. In particular, they will look into the job-market signaling model of Spence and other asymmetric information models.

Finally, the course will address cooperative games. The students will learn the basics of bargaining theory and cooperative game theory.

Learning Outcome

After completing the course, the student should be able to:


  • Formally state the definition of a game and explain the key differences between games of different types (static games of complete information, static games of incomplete information, dynamic games of complete information, and dynamic games of incomplete information).

  • Describe in detail the equilibrium (solution) concepts that are relevant for these games (Nash Equilibrium, Subgame Perfect Nash Equilibrium, Bayes-Nash Equilibrium, Perfect Bayesian Equilibrium).

  • Define a cooperative game and know the solution concepts of cooperative game theory as well as the basics of bargaining theory.

  • Acquire knowledge about a number of special games and particular issues associated with them, such as repeated games (including infinitely repeated games), auctions and signaling games.


  • Explicitly solve for the equilibria of these games.

  • Explain the relevant steps in the reasoning of the solution.

  • Interpret the outcomes of the analysis.

  • Furthermore, be able to apply equilibrium refinements and the solution concepts of cooperative game theory, such as the core.


  • Analyze strategic situations by modeling them as formal games.

  • In particular, have the ability to set up, prove, analyze and apply the theories and methods used in the course in an independent manner.

  • Be able to evaluate and discuss the crucial assumptions underlying the theory.


1. Robert Gibbons. A Primer in Game Theory. Prentice Hall 1992.

Parts of:

2. Martin J. Osborne: An introduction to Game Theory, Oxford University Press, 20043.

3. Some short additional materials (can be downloaded from the course page)

The course requires knowledge equivalent to that achieved in Microeconomics I (Microeconomics A) and Microeconomics II (Microeconomics B).
The teaching will consist of lectures, as well as exercise classes during 14 weeks. While the lectures will discuss and put perspectives on the curriculum, the exercise classes will focus on exercises and applications of the theory. Some relevant experiments will be discussed.

The course consists of 2 hours of lectures 1 to 2 times every week and 2 hours of exercise classes 1 to 2 times every week for 14 weeks.

Timetable and venue:
To see the time and location of lectures and exercise classes please press the link/links under "Se skema" (See schedule) at the right side of this page (16E means Autumn 2016, 17F means Spring 2017). The lectures is shown in each link.

You can find the similar information partly in English at
-Select Department: “2200-Økonomisk Institut” (and wait for respond)
-Select Module:: “2200-E16; [Name of course]” or “2200-F17; [Name of course]”
-Select Report Type: List
-Select Period: “Efterår/Autumn – Weeks 30-3” or “Forår/Spring – Week 4-29”
Press: “ View Timetable”

Please be aware regarding exercise classes:
- The schedule of the exercise classes is only a pre-planned schedule and can be changed until just before the teaching begins without the participants accept. If this happens it will be informed in KUnet or can be seen in the app myUCPH and at the above link.
- If too many students have wished a specific class, students will be registered randomly at another class.
- It is not possible to change class after the second registration period has expired.
- If there is not enough registered students or available teachers the exercise classes may be jointed.
- The student is not allowed to participate in an exercise class not registered, because the room has only seats for the amount of registered student.
- The teacher of the exercise class cannot correct assignments from other students than the registered students in the exercise class.
- That all exercise classes will be taught in English.
7,5 ECTS
Type of assessment
Written examination, 2 hours under invigilation
at the computers of Copenhagen University.
The exam assignment is in English. In the autumn semester the exam and re-sit can be answered in English or in Danish. Language must be chosen at the course or exam registration. In the spring semester the exam and resit can only be answered in English.
Exam registration requirements

As a part of the course, three written assignments should be completed and accepted.

Without aids
Marking scale
7-point grading scale
Censorship form
External censorship
100% censorship
Exam period

Autumn semester 2016: January 3, 2017

Spring semester 2017: June 13, 2017

The exam takes place at Peter Bangs Vej 36. 2000 Frederiksberg http:/​/​pc-eksamen.ku.dk/​pc_exam The exact time of the exam will be informed in the Self-Service at KUnet

For enrolled students more information about examination, rules etc. is available at the student intranet for Examination (English),student intranet for Examination (KA-Danish) and student intranet for Examination (BA-Danish).


Autumn semester 2016: February 9, 2017

Spring semester 2017: August 23, 2017

The re-exam takes place at Peter Bangs Vej 36. 2000 Frederiksberg http:/​/​pc-eksamen.ku.dk/​pc_exam The exact time of the exam will be informed in the Self-Service at KUnet.

If only a few students have registered for the re-exam, the exam might change to an oral exam including the date, time and place for the exam, which will be informed  by the Examination Office.


Criteria for exam assesment

Students are assessed on the extent to which they master the learning outcome for the course.

To receive the top grade, the student must be able to demonstrate in an excellent manner that he or she has acquired and can make use of the knowledge, skills and competencies listed in the learning outcomes.

  • Category
  • Hours
  • Lectures
  • 42
  • Class Exercises
  • 42
  • Preparation
  • 120
  • Exam
  • 2
  • Total
  • 206