Syllabus
Course Meeting Times
Lectures: 2 sessions / week, 1.5 hours / session
Recitations: 1 session / week, 1.5 hours / session
Description
This half-semester course discusses decision theory and topics in game theory. We present models of individual decision-making under certainty and uncertainty. Topics include preference orderings, expected utility, risk, stochastic dominance, supermodularity, monotone comparative statics, background risk, game theory, rationalizability, iterated strict dominance multi-stage games, sequential equilibrium, trembling-hand perfection, stability, signaling games, theory of auctions, global games, repeated games, and correlation.
Prerequisites
The prerequisites for this course are 14.121 Microeconomic Theory I and 14.122 Microeconomic Theory II, or permission of the instructor.
Textbooks
Required
[MWG] Mas-Collel, Andreu, Michael D. Whinston, and Jerry R. Green. Microeconomic Theory. New York, NY: Oxford University Press, 1995. ISBN: 9780195073409.
[FT] Fudenberg, Drew, and Jean Tirole. Game Theory. Cambridge, MA: MIT Press, 1991. ISBN: 9780262061414.
Supplementary
Rubinstein, Ariel. Lecture Notes in Microeconomic Theory: The Economic Agent. Princeton, NJ: Princeton University Press, 2006. ISBN: 9780691120317.
Osborne, Martin J., and Ariel Rubinstein. A Course in Game Theory. Cambridge, MA: MIT Press, 1994. ISBN: 9780262650403.
Grading
| ACTIVITIES | PERCENTAGES |
|---|---|
| Problem sets (6) | 40% |
| Midterm exam | 60% |
Calendar
| SES # | TOPICS | KEY DATES |
|---|---|---|
| 1-2 |
Refresher on preference orderings and utility representation The expected utility hypothesis Positive and normative interpretations | Problem set 1 out on Ses #1 |
| 3-4 |
Risk and risk attitudes Stochastic dominance Applications of expected utility in insurance and finance | Problem set 1 due and problem set 2 out on Ses #3 |
| 5 |
Supermodularity (supermodularity, log-supermodularity, and quasi-supermodularity) and monotone comparative statics Background risk; calibrating risk aversion | Problem set 2 due and problem set 3 out |
| 6 | Beyond expected utility | |
| 7 | Refresher on game theory; rationalizability and iterated strict dominance multi-stage games; iterated conditional dominance in bargaining | Problem set 4 out |
| 8 | Equilibrium refinements: sequential equilibrium, trembling-hand perfection, and stability | Problem set 3 due |
| 9 | Signaling games | Problem set 4 due and problem set 5 out |
| 10 | Positive theory of auctions | |
| 11 | Global games | Problem set 5 due one day after Ses #11 and problem set 6 out |
| 12 | Repeated games with perfect monitoring | |
| 13 |
On the power of correlation Review | Problem set 6 due and midterm exam taken one day after Ses #13 |
