Lahore University of Management Sciences

Econ 233-Introduction to Game Theory

Spring-19-20

Instructor Lyyla Khalid

Room No. 155
Office Hours Mondays through Thursday 12-12:30 or by appointment
Class Times Tuesday/Thursday , M/W 10-11:50
Email lyyla.khalid@gmail.com; lyyla@lums.edu.pk
Telephone +92-42-35608223, 03004533016
TA
TA Office Hours TBA

Course Basics
Credit Hours 4
Lecture(s) Nbr of Lec(s) Per Week 2 Duration 110 minutes
Recitation/Lab (per week) Nbr of Lec(s) Per Week Duration
Tutorial (per week) Nbr of Lec(s) Per Week Duration

Course Distribution
Core No
Elective
Open for Student Category Sophomore
Close for Student Category First year

COURSE DESCRIPTION
Game Theory forms the foundation of modern microeconomics. It aims to promote critical thinking and strategic decision making.

This course introduces students to the field of Game Theory. It focuses on the assumptions made for the study of human behaviour in economics
and seeks to equip students with the basic mathematical tools for modeling and solving everyday strategic interactions (games). Special focus is
given to applications pertaining to business decisions. Other than economics; game theory has wide ranging applications in fields including law,
political science, mathematics, finance and computer science.

COURSE PREREQUISITE(S)

Statistics and Data Analysis

The course assumes some familiarity with calculus and basic optimization.
But most importantly, what is needed is willingness to engage with the material and the ability to do and sustain sophisticated
thinking.

COURSE OBJECTIVES
By the end of the course the students should be familiar with the basic tools used for modeling game theoretic situations and
they should be able to structure, model and solve basic everyday strategic interactions.
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Grading Breakup and Policy

Assignment(s): 5% - there will be two assignments . Students must attempt all questions on the assignment. For purposes of grading and scoring,
we will randomly pick one question out of each assignment and grade it.
Quiz(s): 20% (4 quizzes, 5% each. No quiz will be dropped)
Midterm Examination: 35%
Final Examination: 40%

Examination Detail
Midterm
Exam Yes/No: Yes
Duration: 100 minutes
Preferred Date:
Exam Specifications: Closed books, closed notes; no help sheet, no formula sheet; calculators
allowed

Final Exam
Yes/No: Yes
Combine Separate: Separate
Duration: 100 minutes
Exam Specifications: Closed books, closed notes; no help sheet, no formula sheet; calculators
allowed

Modules and Topics:

Recommended
Module Topics
Readings

1 Introduction Watson Ch 1
     

Concepts and Techniques Watson Ch 2, 3, 4, 5, 6, 7, 11

 Static games
 Normal and Extensive Forms
2
 Dominance and Iterated Dominance
 Pure Strategy Nash Equilibrium
 Mixed Strategy Nash Equilibrium

Dynamic Games Watson Ch 14, 15

 Revisiting Strategies and Extensive Forms
3
 Sequential Rationality and Subgame Perfection

4
Applications Handout- Osborne, Martin J. (2004) An Introduction
 Auctions: First and Second Price Auctions to Game Theory. OUP
 Hotellings Model of Electoral Competition
 War of Attrition Handout- Dutta, Prajit (1999) Strategies and Games:
Cournot Duopoly Model- Cournot Nash equilibrium, Theory and Practice. MIT Press
Cartel solution and the Stackelberg model

GUEST Lecturer – Industrial Organization Guest Lecturer Industrial Organization

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Repeated Games Watson Ch 22, 23

 Finitely Repeated Games Handout- Osborne, Martin J. (2004) An Introduction
 Infinitely Repeated Game to Game Theory. OUP
5  Reputations and Cooperation
 An application- Bargaining games Handout- Dutta, Prajit (1999) Strategies and Games:
 An application- OPEC Model Theory and Practice. MIT Press

     

Bayesian Games
6  Incomplete Information Watson Ch 24,26
 Bayesian Nash Equilibrium
     

Textbook(s)/Supplementary Readings
Main text: Watson, Joel. Strategy: An Introduction to Game Theory. Third Edition. W.W. Norton & Company.

Additional Texts:
1) Dutta, Prajit (1999) Strategies and Games: Theory and Practice. MIT Press
2) Osborne, Martin J. (2004) An Introduction to Game Theory. OUP
3) Avinash Dixit, Susan Skeath and David H. Reiley, Jr. Games of Strategy.
All of these texts are in our library. There are a number of other introductory game theory texts too. Each text will have a bit of notational
variation, but each of them covers the basic topics we will be covering.

Lecture Slides: My PowerPoint lecture slides will be available to all whenever used in class.