10599 Strategic Thinking: Game Theory with Economics and Business Applications 1

Credits: 3 advanced credits in Economics or in Management

Prerequisites: 36 credits, including Introduction to Statistics for Students of Social Sciences I (or Introduction to Statistics and Probability for Science Students), Introduction to Statistics for Students of Social Sciences II, and one of the following: Calculus for Students of Economics and Management, Differential and Integral Calculus I or Infinitesimal Calculus I. Students must also fulfill all English requirements and take bibliographic instruction in the Library.

Recommended: Price Theory I

Author: Aviad Heifetz

Game theory addresses strategic interactions among a number of decision-makers. In such strategic encounters, all players are aware of the fact that their actions affect the other players. Game theory analyzes how these interactions channel the players’ decisions and lead to the final outcome.

The course focuses on applications of complete-information games in economics and management as well as in other fields such as political science, law and biology. Game theory is used for analyzing auctions, bargaining, political campaigns and voting systems, international conflicts, competition between manufacturers, salaries and incentives in firms, provision of public goods, patent races, crime and enforcement policy, job-seeking and unemployment, currency attacks and financial crises, subsidies and customs in international trade.

The course discusses the following central theoretical concepts: strategic-form games, dominant and dominated strategies, Nash equilibrium, choice under uncertainty, pure and mixed strategies, security strategies and the minimax theorem, rationalizable strategies, equilibrium stability, evolutionary game theory, equilibrium selection, extensive-form games, subgame perfect equilibrium, backward induction, chance moves and repeated games.

1There is some overlap in the content of this and other courses. For details, see Overlapping Courses.

Students may write a seminar paper in this course, although it is not required.