Game Theory

Module code: EC2043

Module co-ordinator: Professor Chris Wallace

Game theory is a mathematical method for analysing strategic interactions. It is used to study situations of conflict and cooperation in which the combined actions of two or more decision-makers affect each other's welfare.

Game theory is useful for understanding the interactions between companies that compete with one another, the deals that are struck between contracting parties, the prices that are paid in auctions and markets, the behaviour of competing political parties, the evolution of traits in biological populations, and much more.

It has helped economists understand and explain a variety of interactive phenomena. For example, economists used game theory to help in the design of the auction formats that the UK Government used to sell the '3G' mobile telephone licences in 2000. Those auctions raised in excess of £20bn for the taxpayer.

Topics covered

  • Formulating strategic-form games
  • Finding pure and mixed Nash equilibria in strategic-form games
  • Formulating and analysing dynamic interactions in extensive form
  • Finding subgame-perfect equilibria in extensive-form
  • Formulating and analysing repeated games
  • Modelling uncertainty and information in static and dynamic games
  • Finding equilibria in simple games of incomplete information
  • Applying game theory to e.g. auctions, bargaining, signalling and voting

Learning

  • 20 one-hour lectures
  • 8 one-hour tutorials

Assessment

  • Online multiple-choice test, 1 hour (20%)
  • Exam, 2 hours (80%)