Advanced Microeconomics

Game Theory

The lecture „Game Theory“ is part of the economic module „Game Theory and Experimental Economics“. The module consists of the lectures „Game Theory“ (Prof. Frambach), „Experimental Economics“ (Prof. Bönte) and exercise sessions. In the first lecture dealing with game theory, students learn fundamental mechanisms to explain decision making, attaining a deeper understanding of those economic processes underlying social, political and economic affairs. By the end of the lecture on game theory, students should be able to cope with fundamental advanced microeconomic methods of decision making, analyze complex decision situations by game theoretic approaches, to critically assess microeconomic instruments and methods regarding their appropriateness and outcomes in relation to alternative approaches. In the second lecture “Experimental Economics”, students get familiarized with experimental methods across different research streams in a reflective way. They will be enabled to develop the skills necessary to critically evaluate experimental research and to understand the opportunities and limits of the experimental research method.

Game Theory (detailed structure)

0 Introduction

1 Strategic Decision Making

2 Strategic Form Games

2.1 Dominant Strategies

2.2 Nash Equilibrium

2.3 Prisoners‘ Dilemma

2.4 Repeated Games and Strategies

2.5 Mixed Strategies and Nash Equilibrium

2.6 Incomplete Information

3 Extensive Form Games

3.1 Game Trees: A Diagrammatic Representation

3.2 An Informal Analysis of Take-Away

3.3 Extensive Form Game Strategies

3.4 Strategies and Payoffs

3.5 Games of Perfect Information and Backward Induction Strategies

3.6 Games of Imperfect Information and Subgame Perfect Equilibrium

3.7 Mixed Strategies, Behavioral Strategies, and Perfect Recall

3.8 Sequential Equilibrium

3.9 Detailed Example of Bayes Rule: Job-Market Signalling

3.10 Examples for Dynamic Choice: Searching for Lowest Price & Optimal Wage

4 A brief Outlook on Experimental Games