ADVANCED MICROECONOMIC THEORY 2
Classical and Behavioral Game Theory
CEU, Economics Department




Lecturer:  Prof. Herbert Gintis
Course: 2 credits

The students analyze extensive and normal form games, using solution concepts that include iterated elimination of dominated
strategies, rationalizability, and Nash equilibrium. I present interactive epistemological analyses of equilibrium concepts,
including the famous Aumann and Brandeburger (1995) paper. I present modern decision theory in some depth, as well as
experimental work that assesses how proficient individuals are in making decisions. This includes the usual Allais and Ellsberg
"paradoxes," prospect theory, base rate fallacies, preference reversal, fanning out, and the like. I present extensive evidence from
behavioral game theory as to the nature of individual preferences (personal gain, fairness, reciprocity, empathy, and the like). I
analyze mixed strategy equilibria and present the Harsanyi purification theorem and the conjectural approach of Aumann et al to
justify mixed strategy equilibria. We study subgame perfection in some depth. We the do repeated games, including the Folk
theorem. Students are responsible for all definitions, statements of major theorems, and they must be able to solve a wide
variety of problems. The book I use is Herbert Gintis, Game Theory Evolving: A Problem-Centered Introduction to
Strategic Interaction (Princeton, 2000).
 

Course Outline:
 Basic Concepts of Game Theory: Game Theory Evolving, Chapter I

 Dominated Strategies: Game Theory Evolving, Chapter 2

 Behavioral Decision Theory: Game Theory Evolving, Chapter 3

 Behavioral Game Theory:  Game Theory Evolving, Chapter 4

  Pure Strategy Nash Equilibria:  Game Theory Evolving, Chapter 5

  Mixed Strategy Nash Equilibria:  Game Theory Evolving, Chapter 6

  Subgame Perfection:  Game Theory Evolving, Chapter 7

  Repeated Games:  Game Theory Evolving, Chapter 8