Instructor: Santanu Roy *University Distinguished
Professor, Department of Economics*, SMU.

Office: 301-NA Umphrey Lee

Tel:
214 768 2714

Fax:
214 768 1821

E-mail: sroy@smu.edu

Teaching Assistant: Mr. Abdullah Shamim,
E-mail: ashamim@smu.edu

**Lectures:
Tuesday and Thursday, 2 - 3.20 PM, Clements 126.**

** **

**This is an introductory
course on non-cooperative game theory and its application to selected areas of
economics. Game theory deals with multi person decision making when every
individual cares about how others choose to act and
therefore, each individual's behavior is strategic in the sense that it takes
into account decisions made by other individuals and the fact that others may
also behave in a similarly strategic fashion. Non-cooperative game theory
specifically addresses a class of such multi person decision problems where the
individual objectives may, in principle, be in "conflict." **

**In the last three decades,
non-cooperative game theory has been applied very extensively in economics and
several other social sciences (such as political science). It is the primary
tool used to analyze market competition between small numbers of big firms
(oligopolies), corporate decision making, interaction between buyers and
sellers in auctions, behavior of parties involved in bargaining (such as labor
unions and management of corporate firms), strategic interaction of governments
in the determination of international trade policy, interaction over time
between macroeconomic policy makers and economic agents, lobbying, competitive
extraction of natural resources and so on. Indeed, it is impossible to
understand and analyze theoretical models in most areas of modern economics
without some basic knowledge of game theory. **

**This course aims to equip
students with the foundations of game theoretic analysis and show how they can
be applied to obtain insights in concrete economic problems. While most of the
applications will be drawn from industrial organizations, the course will also
cover problems from other areas of economics. **

__List of Topics __

*** Static Games of Complete
Information: Normal form games and Nash Equilibrium; Applications to Cournot
and Bertrand oligopoly, Tragedy of the Commons, Introduction to
Mixed Strategy. [Textbook: Chapter 1: Sections 1.1, 1.2 and 1.3.A]**

*** Dynamic Games of Complete
Information: Backward Induction, Applications to Stackelberg
Duopoly & Sequential Bargaining; Two Stage games of Imperfect Information,
Subgame Perfection, Applications to Bank Runs, International Tariff
Competition; Extensive form representations. Repeated Games: Finitely and
Infinitely Repeated Games; Applications to Collusion in Oligopoly, Efficiency
Wages, Time Consistent Monetary Policy. [Textbook: Chapter 2: Sections
2.1, 2.2, 2.3 and 2.4]**

*** Static Game of Incomplete
Information: Bayes Nash Equilibrium; Application to Auctions. [Textbook:
Chapter 3: Sections 3.1, 3.2.B]**

*** Dynamic Games of Incomplete
Information: Perfect Bayesian Equilibrium and Signaling Games. [Textbook:
Chapter 4: Sections 4.1 and 4.2]**

- ECO 3301 (Price Theory).

Expected Background: **The course will require familiarity with
basic algebra, calculus and probability theory. **

SAMPLE MIDTERM EXAM FROM A PREVIOUS YEAR

SAMPLE FINAL EXAM FROM A PREVIOUS YEAR

PROBLEM SET 1 (Due September 6, Tuesday, In Class)

PROBLEM SET
2 (Due September 15, Thursday, In Class)