AØKA08005U  Microeconomics C

Volume 2013/2014
Education
BSc in Economics - compulsory
MSc in Economics
Content

Game Theory has become a central analytic tool in economics, e.g. within industrial organization, macroeconomics, international economics, labor economics, public economics, political economics and financial economics.

The course aims at giving the student knowledge 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.

 In the first part of the course, devoted to static games with complete information, the students get introduced to the concept of normal form game. They will learn about solution concepts such as dominance and Nash Equilibrium. They will also study economic applications of the theory, such as different models of imperfect competition (Cournot/Bertrand oligopoly). 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 will introduce dynamic games of complete information. The students will learn the respective theory, and discuss economic applications, such as the Stackelberg leadership model. The students will also 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 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.

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

Learning Outcome

To obtain a top mark in the course students must prove their ability to set up, prove, analyze and apply the theories and methods used in the course in an excellent manner. More specifically, the students should know the theory and be able to work with both normal and extensive form games. They should know, understand and be able to apply the concepts of dominant strategies, iterative elimination of dominant strategies, as well as mixed strategies.

The students should know the central equilibrium concepts in non-cooperative game theory, such as Nash Equilibrium, Subgame-Perfect Nash Equilibrium, Bayesian Nash Equilibrium, and Perfect Bayesian Equilibrium. They should understand why these concepts are central, when they are used and how they are related, and be able to apply the relevant equilibrium and solution concepts. Furthermore, the students should acquire knowledge about a number of special games and the particular issues associated with them, such as repeated games (including infinitely repeated games), auctions and signaling games. The students should also understand and be able to apply the solution concepts of cooperative game theory, such as the core. Furthermore, the students should also learn the basics of bargaining theory. To obtain a top mark in the course the student must be able excel in all of the areas listed above.

Syllabus:

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)

Microeconomics A and B
3 hours of lecturing and 3 hours of excercises per week for 14 weeks
The teaching will consist of lectures, as well as exercise classes. 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. Lectures are held in English, and exercise classes are held both in English and Danish.
Credit
7,5 ECTS
Type of assessment
Written examination, 2 hours under invigilation
2 hours writtten assignment taking place at Peter Bangs Vej 36.
Exam registration requirements
As a part of the course, three written assignments should be completed and accepted.
Aid
Without aids
Marking scale
7-point grading scale
Censorship form
External censorship
100 % external censorship
Exam period
Will be published before the start of the semester
Re-exam
Same as ordinary. But if only a few students have registered for the re-exam, the exam might change to an oral exams with a synopsis to be handed in. This means that the examination date also will change.
Criteria for exam assesment
The Student must in a satisfactory way demonstrate that he/she has mastered the learning outcome of the course.
  • Category
  • Hours
  • Lectures
  • 42
  • Class Exercises
  • 42
  • Preparation
  • 120
  • Exam
  • 2
  • Total
  • 206