Economics 286 Jonathan Levin

Spring 2006 Stanford University

Game Theory Syllabus
Overview. This is an advanced course in game theory, intended for students who
are interested in pursuing micro theory research or who want a good theory back-
ground to do applied work. The course will cover a combination of standard results
and current research topics. The prerequisite is familiarity with the basic ideas of
game theory Nash equilibrium, subgame perfection, incomplete information
as introduced in Economics 203. Please talk to me if you havent taken Economics
203 or 160 or another equivalent.
Logistics. The class meets MW 9:0010:50 in Econ 218. I plan to have oce
hours M 3:155 in my Economics Department oce (Landau 240). You can also
contact me to make an appointment for some other time. My email address is
[email protected]. Ill post assignments, lecture notes, etc. on the Stanford
Coursework class web page.
Assignments and Grading. There will be four problem sets and a nal exam.
Grades are based on a weighted average of assignments (40%) and the exam (60%).
The assignments will be spaced evenly over the quarter. I encourage you to collabo-
rate so long as solutions are written up individually. Ill post solutions on the course
web page. The grader for the class is Xiaochen Fan ([email protected]) please
dont harass her unnecessarily. The exam will have a 24 hour take-home format,
with a several day window for taking it.
Reading. I will hand out notes for all the lectures. The lectures notes will have
detailed references; virtually all the papers can be downloaded easily. There are also
several books you may nd useful.
Fudenberg, D. and J. Tirole, Game Theory, MIT Press, 1992.
Osborne, M. and A. Rubinstein, A Course in Game Theory, MIT Press, 1994.
Mailath, G. and L. Samuelson, Repeated Games and Reputations: Long-Run Rela-
tionships, Oxford, 2006.
The rst two are general texts and have substantial overlap. Both are excellent, but
close to fteen years old. The Mailath-Samuelson book is not-yet released; you can
nd selected chapters on George Mailaths webpage at Penn.
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Outline of Topics
1. Solution Concepts (2 lectures)
FT, chapter 2; OR, chapters 24.
Bernheim, D. (1984) Rationalizable Strategic Behavior, Econometrica, 52,
1007-1028.
Pearce. D. (1984) Rationalizable Strategic Behavior and the Problem of
Perfection, Econometrica, 52, 1029-1050.
Aumann, R. (1987) Correlated Equilibrium as an Extension of Bayesian
Rationality, Econometrica, 55, 1-18.
Brandenburger, A. and E. Dekel (1987): Rationalizability and Correlated
Equilibria, Econometrica, 55, 13911402.
Gul, F. (1998) A Comment on Aumanns Bayesian View, Econometrica,
66.
Fudenberg, D. and D. Levine (1993) Self-Conrming Equilibrium, Econo-
metrica, 61, 523- 546.
Dekel, E., D. Fudenberg and D. Levine (2004) Learning to Play Bayesian
Games, Games and Econ. Behav., 46, 282-303.
2. Common Knowledge and Common Priors (2 lectures)
OR, chapter 5.
Samuelson, L. (2004) Modeling Knowledge in Economic Analysis, J. Econ.
Lit., 62, 367-403.
Aumann, R. and A. Brandenburger (1995) Epistemic Conditions for Nash
Equilibrium, Econometrica, 63, 1161-1180.
Aumann, R. (1976) Agreeing to Disagree, Ann. of Stat.
Milgrom, P. and N. Stokey (1982) Information, Trade and Common Knowl-
edge, J. Econ. Theory, 26, 177-227.
Harrison, M. and D. Kreps (1978): Speculative Investor Behavior in a Stock
Market with Heterogeneous Expectations, Quart. J. Econ, 92, 323-336.
3. Supermodular Games and Global Games (2 lectures)
Milgrom, P. and J. Roberts (1990) Rationalizability and Learning in Games
with Strategic Complementarities, Econometrica, 58, 1255-1277.
Carlsson, H. and E. van Damme (1993) Global Games and Equilibrium
Selection, Econometrica, 61, 989-1018.
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Morris, S. and H. Shin (1998) Unique Equilibrium in a Model of Self-
Fullling Attacks, Amer. Econ. Rev., 89, 587597.
Morris, S. and H. Shin (2002) The Social Value of Public Information,
Amer. Econ. Rev., 92, 1521-1534.
Morris, S. and H. Shin (2003) Global Games: Theory and Applications, in
Advances in Economics and Econometrics, Cambridge University Press.
Abreu, D. and M. Brunnermeier (2003) Bubbles and Crashes, Economet-
rica, 71, 173204.
4. Repeated Games (4 lectures)
Fudenberg and Tirole, chapter 5.
Osborne and Rubinstein, chapter 8.
Abreu, D. On the Theory of Innitely Repeated Games with Discounting,
Econometrica.
Abreu, D. D. Pearce and E. Stacchetti (1990) Toward a Theory of Dis-
counted Repeated Games with Imperfect Monitoring, Econometrica, 60,
1041-1063.
Fudenberg, D. and E. Maskin (1986) The Folk Theorem for Repeated Games
with Discounting or with Incomplete Information, Econometrica.
Fudenberg, D. D. Levine and E. Maskin (1994) The Folk Theorem with
Imperfect Public Information, Econometrica, 64, 997-1039.
Levin, J. (2003) Relational Incentive Contracts, Amer. Econ. Rev.
Sekiguchi, T. (1997) Eciency in Repeated Prisoners Dilemma with Private
Monitoring, J. Econ. Theory, 76, 345361.
Ely, J. and J. Valimaki (2002) A Robust Folk Theorem for the Prisoners
Dilemma, J. Econ. Theory.
Mailath, G. and S. Morris (2002) Repeated Games with Almost-Public Mon-
itoring, J. Econ. Theory.
Matsushima, H. (2004) Repeated Games with Private Monitoring: Two
Players, Econometrica.
Ely, J., J. Horner, and W. Olszewski (2005) Belief-free Equilibria in Re-
peated Games, Econometrica.
Horner, J. and W. Olszewski (2006) The Folk Theorem for Games with
Private Almost-Perfect Monitoring, Econometrica.
5. Reputation (2-3 lectures)
Kreps, D. and R. Wilson (1982) Reputation and Imperfect Information, J.
Econ. Theory, 27, 253-179.
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Milgrom, P. and J. Roberts (1982) Predation, Reputation, and Entry De-
terrence, J. Econ. Theory, 27, 280-312.
Fudenberg, D. and D. Levine (1989) Reputation and Equilibrium Selection
in Ganes with a Patient Player, Econometrica, 57, 759-778.
Schmidt, K. (1993) Reputation and Equilibrium Characterization in Re-
peated Games with Conicting Interests, Econometrica, 61, 325-351.
Tiroloe, J. (1996) A Theory of Collective Reputations, Rev. Econ. Studies.
Ely, J. and J. Valimaki (2002) Bad Reputation, Quarterly J. Econ.
Tadelis, S. (2003) The Market for Reputations as an Incentive Mechanism,
J. Pol. Econ.
Mailath, G. and L. Samuelson (2001) Who Wants a Good Reputation, Rev.
Econ. Studies.
Abreu, D. and F. Gul (2001) Bargaining and Reputation, Econometrica.
Cripps, M., G. Mailath and L. Samuelson (2004) Imperfect Monitoring and
Impermanent Reputations, Econometrica.
Abreu, D. and D. Pearce (2005) Reputational Wars of Attrition with Com-
plex Bargaining Postures, Working Paper.
6. Learning in Games (2 lectures)
Fudenberg, D. and D. Levine, Theory of Learning in Games, MIT Press,
1998.
Kalai, E. and E. Lehrer (1993) Rational Learning Leads to Nash Equilib-
rium, Econometrica, 61, 10191045.
Nachbar, J. (1997) Prediction, Optimization, and Learning in Repeated
Games, Econometrica, 65, 275-309.
Erev, I. and A. Roth (1998) Predicting how People Play Games: Rein-
forcement Learning in Experimental Games with Unique Mixed Strategy
Equilibria, Amer. Econ. Rev., 85, 848881.
Hart, S. and A. Mas-Colell (2003) Uncoupled Dynamics Do Not Lead to
Nash Equilibrium, Amer. Econ. Rev., 93, 1830-1836.
Bereby-Meyer, Y. and A. Roth (2006) Learning in Noisy Games: Partial
Reinforcement and the Sustainability of Cooperation, Amer. Econ. Rev.
7. Behavioral Game Theory: Experiments (1 lecture)
Camerer, C. (2003) Behavioral Game Theory: Experiments on Strategic In-
teraction, Princeton: Princeton University Press, 2003.
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Crawford, V. (1997) Theory and Interaction in the Analysis of Strategic
Interaction, Advances in Economics and Econometrics, Seventh World
Congress of the Econometric Society, Volume 1.
Nagel, R. (1995) Unraveling in Guessing Games: An Experimental Study,
Amer. Econ. Rev., 85, 13131326.
Costa-Gomes, M., V. Crawford and B. Boseta (2001) Cognition and Behav-
ior in Normal-Form Games: An Experimental Study, Econometrica.
Costa-Gomes, M. and V. Crawford, Cognition and Behavior in Two-Person
Guessing Games: An Experimental Study, Working Paper.
8. Behavioral Game Theory: Models (2-3 lectures)
Geanakoplos, J., D. Pearce and E. Stacchetti (1989) Psychological Games
and Sequential Rationality, Games Econ. Behav., 1, 60-79.
Rabin, M. (1993) Incorporating Fairness into Game Theory and Economics,
Amer. Econ. Rev., 85, 1281-1302.
Fehr, E. and K. Schmidt (1999) A Theory of Fairness, Competition and
Cooperation, Quart. J. Econ. 114, 817-868.
Bernheim, D. and A. Rangel (2004) Addiction and Cue-Triggered Decision
Processes, Amer. Econ. Rev.
Fudenberg, D. and D. Levine (2005) A Dual Self Model of Impulse Control,
Working Paper.
Koszegi, B. and M. Rabin (2006) A Model of Reference Dependent Prefer-
ences, Quart. J. Econ.
Heidhues, P. and B. Koszegi (2006) The Impact of Consumer Loss Aversion
on Pricing, Working Paper.
Dewatripont, M. and J. Tirole (2005) Modes of Communication, J. Pol.
Econ.
Eyster, E. and M. Rabin (2005) Cursed Equilibrium, Econometrica.
Esponda, I. (2006) Behavioral Equilibrium in Economies with Adverse Se-
lection, Working Paper.
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