28873 - Microeconomics 1

Learning outcomes

At the end of the course the student knows how to identify environments with strategic interaction and to use the formal language of game theory to describe and interpret them.

He/she will able to recognize the major strategic ingredients and to predict behavior and outcomes in both real and abstract games.

The student will be able to understand the role of information and of dynamics in strategic interaction environments.

Course contents

1 Static Games of Complete Information

- Basic Theory: Narmal-Form Games and Nash Equilibrium

- Normal-Form Representation of Games

- Iterated Elimination of Strictly Dominated Strategies

- Motivation and Definition of Nash Equilibriuin

- Applications

- Mixed Strategies

- Existence of Nash Equilibrium

2 Dynamic Games of Complete Information

- Dynamic Games of Complete and Perfect Information

- Theory: Backwards Induction

- Applications

- Two-Stage Games of Complete but Imperfect Information

- Theory: Subgame Perfection

- Repeated Games

- Theory: Two-Stage Repeated Games

- Theory: Infinitely Repeated Games

- Applications

3 Dynamic Games of Complete but Imperfect Information

- Extensive-Form Representation of Games

- Subgame-Perfect Nash Equilibriuin

- Static Games of Incomplete Information

- Theory: Static Bayesian Ganies and Bayesian Nash Equilibrium

- Normal-Form Representation of Static Bayesian Games

- Definition of Bayesian Nash Equilibrium

- Applications

- Mixed Strategies Revisited

- An Auction

4 Dynamic Games of Incomplete Information

- Introduction to Perfect Bayesian Equilibrium

- Signaling Games

- Perfect Bayesian Equilibrium in Signaling Games

- Job-Market Signaling

- Cheap-Talk Games

- Refinements of Perfect Bayesian Equilibrium

Readings/Bibliography

Microeconomic Theory, Andreu Mas-Colell, Michael D. Whinston and Jerry R. Green, Oxford University press (PART II)

or

A Primer in Game Theory, Robert Gibbons, Pearson

Teaching methods

Class lectures and individual study.

Depending on time and class size, class experiments may be part of the teaching activities.

Assessment methods

- Assignments ‐ homework (groups max 2 persons) with study and “creativity” needed: 40%;

– Written exam, more exercise style and definitions: 55%;

– Class participation 5% (active students' participation and "cold" questions).

(Notice this course is integrated with Micro 2 LMEC and a single grade will be registered, averaging the grades in the two sections micro 1 and micro ".)

Teaching tools

Traditional class lecturing.

Depending on the number of enrolled students, the course may contemplate participation to class experiments.

Links to further information

https://sites.google.com/site/lmecgametheory/

Office hours

See the website of Giacomo Calzolari