``G751: Game Theory'' Spring 2011 (March 9, 2011)

Instructor: Professor Eric Rasmusen. Email: Erasmuse@indiana.edu. Office phone: 855-9219; after hours: 855-3356. Office: BU 438. Course Number 29010.
Web (this page): http://www.rasmusen.org/g751/0.g751.htm. Web (Oncourse): http://oncourse.iu.edu/. The main course website is at http://rasmusen.org. Grades will be posted on Oncourse, but I will not look at Oncourse regularly.
Class time: Tuesday and Thursday 9:30-10:45 a.m. in CG 2077.
Office hours: Wednesdays 10:30-11:30, 1:30-2:30. (but feel free to drop in other times if my door is open).
Text: Games and Information, 4th edition (green cover), Eric Rasmusen.
Optional: Readings in Games and Information, Blackwell Publishers, 2001. This was my course packet for a larger version of the course, and no other book is anything like it.

Your grade will be based on Test 1 (40%) and Test 2 (60%).

Test 1: January 27.
Test 2: February 24.

I've posted questions from old tests at Questions 1 and Questions 2. You can also find there answers to the two tests from this semester in that directory.

The pdf slides I used for this class last year are in the directory http://www.rasmusen.org/g751/slides-g751 and I will update them if I use slides again.

Topics

A. Game Structure and Equilibrium: definitions, dominated and dominant strategies, iterated dominance, Nash equilibrium, focal points. (Chapter 1).
Eric Rasmusen, "Entry for Buyout," Journal of Industrial Economics (March 1988), 36: 281-300. http://rasmusen.org/published/Rasmusen_88.JIE.buyout.pdf. Albert Tucker, ``A Two-Person Dilemma,'' unpublished notes (May 1950).

B. Information: strategic and extensive forms, information sets, imperfect information, incomplete information, Bayesian games, application to litigation. (Chapter 2)
Nicholas Pileggi, Wise Guy:Life in a Mafia Family, pp. 267-269, New York: Simon and Schuster (1985).
The Private and Social Value of Information and the Reward to Inventive Activity Jack Hirshleifer The American Economic Review Vol. 61, No. 4 (Sep., 1971), pp. 561-574 http://www.jstor.org/stable/1811850
Eric Rasmusen, "Career Concerns and Ambiguity Aversion," Economics Letters, 108(2): 175--177 (August 2010). . http://www.rasmusen.org/papers/ambiguity-rasmusen.pdf
Eric Rasmusen (2001) ``Aphorisms on Writing, Talking, and Listening.''

C. Mixed and Continuous Strategies: mixed strategies, games of timing, randomizing, continuous strategies, strategic substitutes and complements, equilibrium existence. Applications to auditing and pricing strategies. (Chapter 3)
Jack Hirshleifer and Eric Rasmusen, ``Are Equilibrium Strategies Unaffected by Incentives?'' Journal of Theoretical Politics , (July 1992), 4: 343-357. http://rasmusen.org/published/hirshleifer-rasmusen.92.jtp.mixed.pdf .
Brian Cadman, Sandy Klasa, and Steve Matsunaga (2010) "Determinants of CEO Pay: A Comparison of ExecuComp and Non-ExecuComp Firms," The Accounting Review 85 (5), 1511 (2010).
Harry Roberts and Roman Weil, "Starting Research Early," University of Chicago Graduate School of Business (August 14, 1970).

D. Dynamic Games: subgame perfection, credibility, renegotiation. Applications to entry deterrence and extortion. (Chapter 4)
Judith Lachman, "Knowing and Showing Economics and Law," (A review of An Introduction to Law and Economics, A. Mitchell Polinsky (1983)) Yale Law Journal, 93: 1587, 1598-1605 (July 1984).
Notes on the Lachman article

E. Reputation and Repeated Games: finitely repeated games, indefinitely repeated games, reputation. Applications to bargaining, branding, quality assurance, incentives. (Chapter 5)
"Examples of Plea Bargains". Excerpted from Eric Rasmusen, "Mezzanatto and the Economics of Self Incrimination," Cardozo Law Review, 19: 1541-1584 (May 1998).
David Hirshleifer and Eric Rasmusen, ``Cooperation in a Repeated Prisoner's Dilemma with Ostracism," Journal of Economic Behavior and Organization (August 1989), 12: 87-106 http://rasmusen.org/published/Rasmusen_89JEBO.ostracism.pdf

F. Bargaining: splitting a pie, the Nash Bargaining Solution, sequential bargaining, the Rubinstein Solution, outside options (Chapter 12)
Ariel Rubinstein, ``Perfect Equilibrium in a Bargaining Model," Econometrica, 50: 97-109 (January 1982).
Eric Rasmusen, "Rethinking Bargaining Under Complete Information with Outside Options".
1-page examples for learning Latex (also the pdf output) and html.
Notes on Rubinstein (1982).

URL: http://www.rasmusen.org/g751/0.g751.htm. Indiana University, Department of Business Economics and Public Policy, in the Kelley School of Business , BU 438, 1309 East Tenth Street, Bloomington, Indiana 47405-1701, (812)855-9219. Comments: Erasmuse@ Indiana.edu.

Learning Goals. The Kelley Dean's office has requested faculty to put on their syllabi linkage to ``Learning Goals'', in the style of Schools of Education. To please it, I will note that this course helps with Learning Goal 1, Comprehensive and Intensive Disciplinary Knowledge, because it teaches game theory results. It will help with Learning Goal 2, Comprehensive and Intensive Disciplinary Knowledge of Research Methods, because it teaches game theory methods. It will help with Learning Goal 3, Communication of Disciplinary Research, because students will learn how to set up models in Player-Actions-Payoffs-Information format.

Learning Outcomes. What students will learn in this course is to read scholarly work using the techniques of game theory and how to apply those techniques in their own work. This will involve learning the use of specific concepts such as subgame perfectness, extensive forms, backwards induction, the computation of mixed strategies, and the theory of repeated games.