**HSS 303: Introduction to Game Theory (3)**

*Learning Objectives*:

- Rational decision making, utility function and the case of uncertainty.
- The definition of a game, complete information, static games.
- Nash equilibrium in pure and mixed strategies.
- Extensive-form games, game trees, subgame perfect Nash equilibrium.

*Course Contents*:

*Rational decision making, utility function and the case of uncertainty: *preference relations, rationality, existence of utility functions, rational choice paradigm, uncertainty, lotteries, von Neumann-Morgenstern expected utility function, decision making under uncertainty, value of information.

*The definition of a game, complete information, static games:* normal-form games, pure strategies, mixed strategies, examples of games like prisonerâ€™s dilemma, rock-paper-scissors, cournot duopoly, dominated strategies, beliefs, best responses, solutions concepts like iterated elimination of strictly dominated pure strategies, rationalizability.

*Nash equilibrium in pure and mixed strategies:* definition of Nash equilibrium in pure and mixed strategies, existence of Nash equilibrium, Cournot duopoly, Bertrand duopoly, median voter theorem.

*Extensive-form games, game trees, subgame perfect Nash equilibrium:* perfect and imperfect information, mixed and behavioural strategies, game trees, sequential rationality, backward induction, subgame perfect Nash equilibrium, centipede game, Stackelberg competition, finitely and infinitely repeated games, the folk theorem, strategic bargaining, contracts

*Incomplete information, Bayesian games:*Playerâ€™s preference type, common prior, static and dynamic games of incomplete information, Bayesian Nash equilibrium, perfect Bayesian equilibrium, sequential equilibrium, adverse selection and signaling, auctions.

**Selected Readings**

*Game Theory: An Introduction*by Steven Tadelis (Princeton University Press)*An Introduction to Game Theory*by Martin J. Osborne (Oxford University Press)- A Course in Game Theory by Osborne and Rubinstein (MIT Press)
*Game Theory*by Fudenberg and Tirole (MIT Press)*Microeconomic Theory*by Mas-Collel, Whinston and Green (Oxford University Press)

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