Game
Theory
|
Course Description
Academic degree: Bachelor's /Undergraduate/ degree*Master degree
* No
prior academic knowledge is important for understanding the subject but
a "precocious" way of thinking
In our everyday life we often meet the problem how individual and collective interests are in conflict. For example, when we take a drive to a traffic jam in rush hours, and thus we cause a waste of time to the others than that of our own gain. When we decide how to behave, we take into account how other players behave, not only because we care about other people but because it affects what we get out of the interaction. Game theory is a systematic study of this strategic interaction. This course is an introduction to game theory, the study of strategic behaviour among parties having opposed, similar or mixed interests. It presents the basic concepts and analytical tools of elementary game theory in a way that allows the student to apply them in real life situations. Strategic interactions are present everywhere, in computer science, economics, politics, law, and at the end of the day we don’t make decisions in a vacuum, we live in society. The goal of the course is to give an insight into the formal ways of thinking about social mechanisms and interactions. At the end of the course
- the student will be able to formalize a strategic situation as a well-defined game;
- choose appropriately from a basic kit of analytic tools, called solution concepts, to analyze and solve a wide variety of games and applications;
- understand the assumptions underlying these concepts, as well as their strengths and limitations;
- students will be able to think strategically and recognize a strategic interaction in real life situations. They should be able to formalize the situation, frame it in terms of the analytical tools discussed, and understand the strategies followed by the protagonists of such interaction.
Outline
Below, I list the main topics to be covered during the semester.
I. Game Theory
as a method to explore social situations
- Methodological Individualism
- Social Mechanisms
II. Games and
Decisions
- How to decide in games?
- The Types of Players
- Thinking as a Strategic Player
- Factual, Stractural and Common Knowledge
III. How to
Solve Games?
- Solving a game in pure strategies
- The Main Theorems of Game Theory
- Solving a game in mixed strategies
- How does a Game-Solver Software work?
IV. Conflicts
- Intensive conflicts as zero-sum games
- Symmetric 2x2 dilemmas
- Asymmetric dilemmas
- Many-persons dilemmas
V. Coordination Mechanisms
- The types of coordination mechanisms: bureaucratic,
spontaneous,
ethical and aggressive
- Bureaucratic coordination: Prisoner's dilemma and the
normative
Hobbes theorem
- Spontaneous coordination and the normative Coase theorem
- Ethical coordination: reciprocal altruism under iterated
interactions
- Intertemporal decision-making: Selten theorem and the folk theorem
- Agressive coordinations: The "Hawk and Dove"
basic model in
Evolutionary Game Theory
VI. Cooperative Games
- The basic concepts of cooperative games
- Forming coalitions and its failure
- Shapley-Shubik power index
- Example: Yalta Conference, 1945
VII. Negotiations
- Bargaining games as bimatrix games
- Bargaining games as sequential move games
- Auctions
Educational Resources
- Lecture Notes:
József Zoltán Málik: Applied Game Theory. Part I: Methodology. Budapest: METU, 2022. (in pdf version
)József Zoltán Málik: Political Game Theory. Part II: Games and Society. Budapest: METU, 2022. (in pdf version
)- Textbooks (non-technical, introductory books, our discussion will be a little bit deeper):
- Ken Binmore: Game
Theory - A very short introduction. Oxford: OUP, 2007.
- Avinash K. Dixit, Susan Skeath: Games
of Strategy.
NY, London: W.W. Norton, 2004.
- On applications in a
more general context (about the rational choice approach):
- Tim Harford: The Logic of Life. NY: Random House, 2008.
- Some additional resources for law students:
- Randal C. Picker: An
Introduction to Game Theory and the Law (The Coase Lecture
Series). Law School, University of Chicago, 1994.
- Ian Ayres: Playing
Games with the Law (Review Essay). Faculty Scholarship Series
(No. 1544), Yale Law School, 1990.
- Robert Cooter and Thomas Ulen: Law and Economics.
Boston: Pearson-Addison Wesley, 2008.
- Video recordings:
- A scene from the movie A
Beautiful Mind, which represents a Prisoner's Dilemma and
Nash
Equilibrium: click
here
- The illustrative story of Holmes-Moriarty paradox,
a spot
from the British Granada TV serial The Adventures Of Sherlock
Holmes: click here(transcript)
- PGT Methodology in Nutshell - video: click here
- Short documentaries presenting the historical background
of
strategic analysis:
- Assassination in Sarajevo,
1914: click
here
- Munich Pact, 1938: click here
- Cuban Missile Crisis, 1962: click here (transcript),
click
here(a
scene from the movie Thirteen
Days)
- The Six-Day War, 1967: click here (transcript)
- Falkland War, 1982: click here (transcript)
- Korean War, 1950-53: click here(transcript)
- Yalta, 1945: click
here(transcript)
Assessment
- The grade is based on a homework that you need to write and submit at the end of the semester. The homework assignment is a short (3-10 pages) presentation of a case study in which game theory methods are used. Here is a short list of topics:
1. Pick up an arbitrary historical, economic, legal, or political issue.
First, describe the case, and then formalize the situation as a
well-defined game, and investigate it from a strategic point of view.
4. Game theory and Law based on the book Robert Cooter and Thomas Ulen: Law and Economics.
5. Rational Choice in Everyday Life (A chosen topic from the book Tim Harford: The Logic of Life.)
6. Use concrete examples from current news to explain and illustrate zero-sum games and interest-based negotiations and to apply their main principles.
I collected examples of this in "pgt_case_studies.pdf"
2. As a multi-player game theory model, present Schelling's model. Two articles by which you can present your own case study:First: Chapter 5, Tim Harford: The Logic of Life
Second: https://www.jasss.org/15/1/6.html (only the sessions 1.1-1.14)
3. Game theory and crisis communication based on
the article
(https://www.finn.agency/its-time-revisit-game-theory-tool-crisis-preparedness-and-crisis-communication-longread/ )Second: https://www.jasss.org/15/1/6.html (only the sessions 1.1-1.14)
4. Game theory and Law based on the book Robert Cooter and Thomas Ulen: Law and Economics.
- Property Rights in terms of Game Theory (Chapter 4)
- Bargaining With the State (p. 78-80; 189-193)
6. Use concrete examples from current news to explain and illustrate zero-sum games and interest-based negotiations and to apply their main principles.
Recommended sources:
https://stevemehta.com/creating-value-zero-sum-game/
https://core.ac.uk/download/pdf/19958827.pdf
7. The theory of International Politics and Gameshttps://stevemehta.com/creating-value-zero-sum-game/
https://core.ac.uk/download/pdf/19958827.pdf
Recommended source: Link
8. Experimental Game Theory (any social or lab experiments based on game theory):- Please, write "PGT_your
name" in
the subject of the email, and convert
your attached paper into . (Don't send your paper in other
format such as doc, odt, rtf).
- To standardize the formatting of your paper, do comply with the requirement of MLA standard. To help your work at home, you can download a template here in doc for MicrosoftOffice Word and here in odt for LibreOffice Writer.
This
course is a part of the ERASMUS+ Program at Faculty of Law,
Eotvos Lorand University, Budapest
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Eotvos Lorand University, Budapest
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