Washington State University

School of Economic Sciences

Advanced Microeconomic Theory - II (Ph.D.)

EconS 503, Spring 2016

    1. Syllabus - EconS 503

    2. Game theory:

      1. Introduction to games and their representation. Link.

      2. Dominance solvable games: application of IDSDS and IDWDS. Link.

      3. Nash equilibrium in games with two players. Link.

        • Handout on IDSDS and Rationalizability with examples. Link.

      4. Nash equilibrium in games with N players. Link.

      5. Nash equilibrium with continuous action spaces. Link.

        • Applications to oligopoly competition. Link.

        • Corner solutions in Cournot games. Link.

      6. Mixed strategy Nash equilibrium (msNE):

        • Mixed strategies with two players. Link.

        • Mixed strategies with N players. Link.

      7. Strictly competitive games, and max-min strategies. Link.

      8. Sequential-move games, and subgame perfect equilibrium (SPNE). Link.

        • Mixed and behavioral strategies in extensive-form games. Link.

        • Applications to dynamic oligopoly competition. Link.

        • Application of subgame perfection to time inconsistent preferences. Link.

      9. Strategic pre-commitment. Link.

      10. Bargaining games over finite and infinite periods. Link.

        • Legislative bargaining (Baron and Forejohn, 1989). Link.

      11. Repeated games:

        • Introduction to Finitely and Infinitely Repeated games. Link.

        • Extensions (Imperfect monitoring, "stick and carrot" strategies, etc.). Link.

          • Applying repeated games to Labor Economics: Efficiency wages. Link.

        • Overlapping generations models and repeated games. Link.

      12. Games of incomplete information - Bayesian Nash equilibrium (BNE). Link.

        • More applications of BNE: The game of chicken. Link.

      13. BNE in games with continuous action spaces:

        • Cournot competition under incomplete information. Link.

        • Public good games under incomplete information: The "study group" game. Link.

      14. More applications of BNE with continuous action spaces (Auction Theory):

        • Auction Theory-I: Paper and Slides.

        • Auction Theory-II: The Revenue Equivalence Theorem. Link.

        • Auction Theory III: Common value auctions. Link.

      15. More applications of BNE - Information Aggregation among several players. Link.

      16. From Bayesian Nash Equilibrium (BNE) to Perfect Bayesian Equilibrium (PBE). Link, and Handout.

      17. A systematic procedure for finding all pure-strategy PBEs: Paper and slides.

      18. Applications of PBE:

        • Labor market signaling game. Link.

        • Monetary authority signaling game. Link.

      19. How to find Semi-separating PBEs (involving mixed strategies):

        • Introduction - Reputation in public good games. Link.

        • Poker game. Link.

        • Brinkmanship game. Link.

      20. Cheap Talk games:

        • Cheap Talk with two types of privately informed player. Link.

        • Cheap Talk with three types of privately informed player. Link.

        • Cheap Talk with a continuum of privately informed players. Link.

        • Cheap Talk and legislative organization (open or closed rules in committees?) Link.

        • Cheap Talk (Literature review by Krishna and Morgan). Link.

      21. Signaling games in which both players (sender and receiver) are privately informed about their own type. Link.

      22. Equilibrium refinement criteria (the "Intuitive Criterion" and the "Divinity Criterion"). Link.

        • You can find more details about the application of these two refinement criteria, including worked-out examples, in this Paper and slides.

    3. Signaling games with continuous action spaces:

      1. Signaling and limit pricing. Link.

      2. Spence's job market signaling game. Link.

    4. Adverse Selection and Screening:

      1. Adverse selection and screening (labor). Link.

      2. Adverse selection and Two-part tariffs (monopoly). Link.

    5. Moral Hazard:

      1. Benchmark and unobservable effort. Link.

      2. Hidden information. Link.

      3. Extensions. Link.

      4. Continuous effort levels (the first-order approach). Link.

      5. Moral hazard in teams. Link.

      6. Empirical tests of Contract Theory (literature review by Chiappori and Salanie). Link.

    6. Mechanism design:

      1. Introductory slides. Link.

      2. Lecture notes on mechanism design. Link.

      3. More examples based on JR. Link.

    7. General equilibrium theory:

      1. Barter economies. Link.

      2. Economies with production. Link.

      3. Core and replicated economies. Link.

      4. Comparative statics. Link.

    8. Social choice theory:

      1. Lecture notes on social choice theory. Link.

      2. Social choice functionals and Arrow's impossibility theorem. Link.

      3. Literature's reactions to Arrow's impossibility theorem. Link.

      4. Revelation of individual preferences (the Gibbard-Satterthwaite theorem). Link.

      5. Alternatives to majority voting. Link.

    9. Weekly review sessions (Practice exercises with answer keys):

      1. Basic elements of game theory. Link.

      2. Nash equilibrium. Link.

      3. Subgame perfect equilibrium. Link.

      4. Repeated games. Link.

      5. Bayesian Nash equilibrium. Link.

      6. Perfect Bayesian equilibrium and Signaling. Link.

      7. PBEs and the application of Cho and Kreps' Intuitive Criterion. Link.

      8. Cheap talk games and Labor market signaling. Link.

      9. Adverse Selection-I. Link.

      10. Adverse Selection-II. Link.

      11. Adverse Selection-III. Link.

      12. Moral Hazard. Link.

      13. Mechanism Design. Link.

      14. Social Choice Theory. Link.

      15. For the section of game theory, you can find more exercises (with answers) in my book: Strategy and Game Theory, Practice Exercises with Answers. Here.

    10. Homework assignments:

      1. Homework #1 - Answer key

      2. Homework #2 - Answer key

      3. Homework #3 - Answer key

      4. Homework #4 - Answer key

      5. Homework #5 - Answer key

      6. Homework #6 - Answer key

      7. Homework #7 - Answer key

      8. Homework #8 - Answer key

      9. Homework #9 - Answer key

    11. Exams:

      1. Midterm exam #1

      2. Midterm exam #2

      3. Final exam

    12. For more class materials go to http://lms.wsu.edu/default.asp



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