Game Theory
Conflict exists not just in most economic scenarios but in almost every human interaction, be it economic, political or social and this course will adopt that broad perspective in developing analyses, results and insights.
This course is designed for students with a background in microeconomic theory and will be taught at the intermediate level. The topic of this course, Game Theory, is an essential tool for analyzing strategic interactions between economic agents. It can help us explain anything from why farmers overgraze a common piece of land to the price at which a buyer and seller agree to trade. This course equips students with the skills to use game theory to model real world scenarios and apply game
theoretic methods to solve these models.
Syllabus and Course Overview
During this course students will be exposed to noncooperative game theory, evolutionary game theory and cooperative game theory. Throughout the majority of the course, we assume hyperrational agents acting in their own interest as we give students a firm grounding in the logic and methods of noncooperative game theory. We apply standard techniques such as domination of strategies, Nash Equilibrium and backwards induction across a wide variety of games. When relaxing this hyperrationality assumption, students will then see how evolutionary game theory gives very similar predictions and thus offers a second justification of Nash Equilibrium. Although, we go slightly further to argue that some equilibria are more stable than others.
As will be seen, in many games like the Prisoner’s Dilemma, game theory predicts suboptimal outcomes, since each agent acts in their selfinterest, which may not be the common interest. One way to escape this is to allow agents to write binding contracts with each other, which enables us to shift the focus from strategies to payoffs. We take a brief venture into cooperative game theory to see how agents will split the gains from forming coalitions.
One common application of game theory is to bargaining. This pertains to any situation whereby two or more agents have an incentive to reach a mutually beneficial agreement, but conflicting interests over the terms of such an agreement. Students will see some of the myriad of situations bargaining theory can be applied to and learn what predictions bargaining theory can help us make about how these situations will be resolved.
The topics to be covered include:
 What game theory is about and why it is “right”
 How to translate a real world scenario into a game theoretic model
 Expected utility theory
 Simultaneous and sequential move games
 Nash Equilibrium
 Domination of strategies
 Backwards Induction
 Games of Incomplete Information
 Mixed strategies
 Models of bargaining
 Bertrand Model
 Cournot Model
 Repeated Games

Electoral competition

Government coalition formation

Redistribution

Strategic voting
Course Aims
As students will discover, game theory is an essential tool for understanding of a wide range real world phenomena. Among others, this course aims to answer three vital questions:
 What is game theory about?
 How do I apply game theory?
 Why is game theory right?
Students should develop an appreciation for how the details of a game such as when players move and why they know can have a large impact on outcomes.
This course aims to equip students with a wide range of game theoretic skills, which will be used in formulating and solving models of their own. By exposing students to a wide variety of topics and applications, this course gives students some idea of the vast range of phenomena one can use game theory to model and explain. This course will also improve powers of logic and encourage students to think strategically in their future everyday life.
Learning Outcomes
By the end of this module, students should be able to:
 Understand the different types of games and their uses in strategic thinking.
 Analyse different games and use a variety of tools to find equilibria.
 Understand expected utility theory and the role of probabilities in explaining behaviour.
 Construct models of bargaining and negotiation and how they can be applied to models of competition.
 Distinguish between the different strands of game theory.
 Justify the predictions of noncooperative game theory an evolutionary perspective.
 Assess the importance of information in games an dhow this can change behaviours.
 Understand the way in which game theoretic models can be applied to a variety of realworld scenarios in economics and in other areas.
Course Structure
For this course, there will be 4 hours of teaching per day, comprised of lectures and small group teaching. The structure will be:
 3 hours of lectures.
 A 1 hour seminar in small groups.
Students will also be given time each day for independent study. Towards the end of the third week, students will be provided with time for revision.
Course Assessment
The module will be assessed via a 2hour examination. It should be noted that the exam is not compulsory. Everyone who completes the course – whether or not they sit the exam  will receive a certificate of attendance. However, by taking the exam you will also receive a grade/mark for the course which can be helpful to you.
Reading List
The main course text is:
 K. Binmore; “Playing for Real (coursepack edition)”; 2012; Oxford University Press.
Below are some further readings that students may find helpful for some parts of the course:
 H. Peters; “Game theory: a multileveled approach”; 2008; Berlin, Springer.
 J. Weibull, “Evolutionary Game Theory”; 1995; MIT Press.
 A. Muthoo; “Bargaining Theory with Applications”; 1999; Cambridge University Press
Entry Requirements
This course is open to students who are studying or have previously studied Economics or Mathematics at University level. You should attach your most recent transcript or provide a screenshot of your modules from your student portal as evidence when you apply. Students should also meet our standard entry requirements and must be aged 18 or over by the time the Summer School commences and have a good understanding of the English language.
Please note the details of the course content may be subject to change