Elements of linear algebra and differential calculus: systems of linear equations, derivatives, maxima and minima of a function of one variable.
Static games with complete information: Nash equilibrium.
Dynamic games with complete information: backwards induction; perfect Nash equilibrium in subgames.
Strategic choices in marketing. The decision variables: price, advertising, product quality, other attributes. Distribution channels: centralized and decentralized supply chains. Competition, cooperation, bargaining.
The course aims to educate students to the analysis of strategic interactions in economics through the study of the basic concepts of game theory with particular reference to equilibria and the central role of information possessed by the agents. The knowledge acquired will enable students to deal with issues of strategic marketing.
The student will learn the concepts of static and dynamic game in normal and extended form, Nash equilibrium and its refinements, Stackelberg equilibrium, the main applications of game theory in economics (eg. Cournot model and its consequences) and strategic marketing.
Robert Gibbons, Game Theory for Applied Economists, Princeton University Press, 1992.
Written and oral examination.
Strategic choices in marketing. The decision variables: price, advertising, product quality, other attributes. Distribution channels: centralized and decentralized supply chains. Competition, cooperation, bargaining. Applications of game theory in marketing.
Static games of complete information. Normal-form games and Nash equilibrium.
Cournot model of duopoly. Bertrand model of duopoly. The problem of the commons.
Mixed strategies and existence of equilibrium.
Dynamic games of complete and perfect information. Backward induction. Stackelberg model of duopoly.
Two-stage games of complete but imperfect information. Subgame-perfect Nash equilibrium.
Tarifs and imperfect international competition.
Repeated games. Trigger strategies. Collusion between Cournot duopolists.
Dynamic games of complete but imperfect information. Extensive-form representation of games.