Game theory represents a theoretical background for optimal behaviour in economic and non-economic decision making situations with several participants. This course examines game-theoretic concepts, models of conflicts and cooperation, concept of equilibrium in different types of strategic interactions and basic computational algorithms. It provides illustrations of presented concepts on basic well-known representative games and also relies on published in-class experiments to provide the students a hands-on experience. Upon successful completion of this course, students will be able to describe, represent and solve decision making situations with several participants. They will also be able to find optimal solutions in decisions under risk and uncertainty.

Conditions for getting the credit:

1. Active participation in classes (20%)

2. Submission of graded homeworks (in total 80%).

R: OSBORNE, M.J. (2011), Introduction to Game Theory (9th edition). Oxford University Press. ISBN: 019512895-8.

R: Başar, T., Zaccour, G. (2018),  Handbook of Dynamic Game Theory, Springer International Publishing AG, 978-3-319-44373-7.

R: GIBBONS, R. (1992) - A Primer in Game Theory, Pearson Academic. ISBN: 9780745011592.

A: Selected academic articles

1. Introduction, definition of basic terms. Role of game theory in economic and social sciences.

2. Strategic interactions. What is game. Types of games and illustrative examples.

3. Static games of complete (and perfect) information. Normal form games. Elimination of strategies (strict vs. weak dominance).

4. Nash equilibrium for static games of complete information. NE in selected games.

5. Pure vs. mixed strategy equilibrium. Lotteries and von Neumann and Morgenstern preferences.

6. Dynamic games of complete and perfect information. Games in extensive form. Backward induction.

7. Subgames. Subgame perfect Nash equilibrium. Applications, practical exercises.

8. Repeated games and their equilibrium.

9. Games of incomplete information. Static (Bayesian) games and Bayesian Nash equilibrium.

10. Applications of Battle of sexes and modified prisoners’ dilemma.

11. Dynamic (signaling) games of complete but imperfect information. Subgames vs. Information sets.

12. Beliefs and weak perfect Bayesian equilibrium and its applications, practical exercises.

13. Auctions (games of incomplete information; static or dynamic). Types, strategies, equilibria, and applications.

14. Final Recap.