Applied Game Theory
Applied Game Theory
Christophe Crombez
Crombez: Applied Game Theory.
1
Applied Game Theory
Introduction
Crombez: Applied Game Theory.
2
What is Game Theory?
• a way of analyzing strategic interactions • appropriate to study situations in which several people take decisions, and o their decisions affect each other’s payoffs • equivalent of decision theory o Crombez: Applied Game Theory.
3
Course Objectives
• introduce you to game theory to understand papers that use it, and o develop game-theoretical models yourselves • the focus is on solution concepts o theory o exercises o a few applications o Crombez: Applied Game Theory.
4
Contents
• Basic equilibrium concepts
Nash equilibria o Subgame perfection o Sequential equilibria • Applications o Bargaining o Entry deterrence o Repeated games o Crombez: Applied Game Theory.
5
Practicalities
• Five meetings • Text Book: Kreps, A Course in Microeconomic Theory,
Chapters 11-15 • Slides on Toledo • Homeworks • Exam: in January, written, open book, exercises
Crombez: Applied Game Theory.
6
Applied Game Theory
Modeling Competitive Situations
Crombez: Doctoral Seminar.
7
Outline
• • • • •
Decision Trees Game Trees (Extensive Forms) Formalities Normal Forms (Strategic Forms) Mixed Strategies
Kreps: Chapter 11
Crombez: Doctoral Seminar.
8
Decision Trees
• • • •
Choice/decision nodes Chance nodes Branches A chance node precedes a choice node iff the uncertainty represented by that chance node resolves in the mind of the decision maker prior to the time at which the choice must be made.
Crombez: Doctoral Seminar.
9
Game Trees
• • • •
Nature Payoffs Information Sets If someone learns something (a move by nature or by another player) prior to making a decision, the node representing what is learned must precede the node where the decision is taken.
Crombez: Doctoral Seminar.
10
Formalities
• An extensive form
Christophe Crombez
Crombez: Applied Game Theory.
1
Applied Game Theory
Introduction
Crombez: Applied Game Theory.
2
What is Game Theory?
• a way of analyzing strategic interactions • appropriate to study situations in which several people take decisions, and o their decisions affect each other’s payoffs • equivalent of decision theory o Crombez: Applied Game Theory.
3
Course Objectives
• introduce you to game theory to understand papers that use it, and o develop game-theoretical models yourselves • the focus is on solution concepts o theory o exercises o a few applications o Crombez: Applied Game Theory.
4
Contents
• Basic equilibrium concepts
Nash equilibria o Subgame perfection o Sequential equilibria • Applications o Bargaining o Entry deterrence o Repeated games o Crombez: Applied Game Theory.
5
Practicalities
• Five meetings • Text Book: Kreps, A Course in Microeconomic Theory,
Chapters 11-15 • Slides on Toledo • Homeworks • Exam: in January, written, open book, exercises
Crombez: Applied Game Theory.
6
Applied Game Theory
Modeling Competitive Situations
Crombez: Doctoral Seminar.
7
Outline
• • • • •
Decision Trees Game Trees (Extensive Forms) Formalities Normal Forms (Strategic Forms) Mixed Strategies
Kreps: Chapter 11
Crombez: Doctoral Seminar.
8
Decision Trees
• • • •
Choice/decision nodes Chance nodes Branches A chance node precedes a choice node iff the uncertainty represented by that chance node resolves in the mind of the decision maker prior to the time at which the choice must be made.
Crombez: Doctoral Seminar.
9
Game Trees
• • • •
Nature Payoffs Information Sets If someone learns something (a move by nature or by another player) prior to making a decision, the node representing what is learned must precede the node where the decision is taken.
Crombez: Doctoral Seminar.
10
Formalities
• An extensive form