Game Theory
This is an introductory course in game theory, designed for the university’s Master and PhD courses and organised by the Cambridge Social Sciences Research Methods Centre. The course is based on Martin J. Osborne’s “An Introduction to Game Theory”.
About
Imagine you are to meet someone in New York tomorrow, but no arrangements have been made about where or when the meeting is to take place. Where will you go? At what time? Why?
Every time human beings interact, they are playing a game. This course is for you if you are interested in understanding these games and applying them to your own work. Game theory isn’t just for mathematicians and economists. It creates models that can be translated to cases for ‘practical use’, such as understanding political risk, the institutional context in which historical events occur, and how and why certain events may happen.
This course has been designed to introduce students to the intricacies and background of game theory. Coupling theory with practical simulations and workshops, students will work with practitioners on static, dynamic, and repeated games, as well as build an understanding of incomplete information. Emphasis will be placed on the relevance of game theory for your own field of study. During this course, participants will:
- formulate their own research question,
- develop a laboratory experiment designed to answer this question,
- present their research question and experimental design in class,
- conduct this experiment with other course participants as a pilot,
- analyze the collected data,
- present their results in a short essay.
Course material
| Time | Topics | Textbook | Games |
|---|---|---|---|
| Monday 26/01/15 | |||
| Venue: Alison Richard Building, Room 119 | |||
| 14:00-15:00 | Briefing session: Intro to Game Theory; Info on course syllabus and student group projects. [Slides, Data, R-Script] | -- | Link to www-experiment |
| Friday 30/01/15, Registration closes: Register online here | |||
| Tuesday 03/02/15, Pre-course survey closes: Submit your preferences over group project topics in groups (of two or three) or individually here | |||
| Tuesday 03/03/15, Submission deadline for research proposals from student groups. | |||
| Monday 16/03/15 | |||
| Venue: Alison Richard Building, Room S1 | |||
| 09:00-11:00 | Introduction: Players and strategies; Rationality and pay-off functions; Information sets; Normal and extensive form representations; Examples of canonical games [Slides] | Ch. 1-2 | -- |
| Venue: Alison Richard Building, Room S1 | |||
| 11:15-13:15 | Group project presentations: Bargaining games | -- | Games: ultimatum game; dictator game; yes-no game Tools: bargaining games |
| Tuesday 17/03/15 | |||
| Venue: Alison Richard Building, Room S1 | |||
| 08:50-10:50 | Solution concepts in static games: Strict and weak dominance; Nash equilibria; Mixed strategies; Application: Provision of public goods [Slides] | Ch. 2-4 | -- |
| Venue: Judge Business School, Computer Lab | |||
| 11:15-12:55 | Experimental Game Theory I [Slides] | -- | Link to www-experiment |
| Wednesday 18/03/15 | |||
| Venue: Alison Richard Building, Room S1 | 09:00-11:00 | Dynamic extensive form games: Games and subgames; Extensive form games, backward induction; Subgame perfect Nash equilibria; Application: Wage-setting game [Slides] | Ch. 5-6 | -- |
| Venue: Alison Richard Building, Room S1 | 11:15-13:15 | Group project presentations: Canonical games | -- | Games: coordination game (e.g. stag hunt, battle of the sexes, etc.); hawk-dove game; prisoner's dilemma; trust game Tools: 2x2 matrix games; trust game |
| Thursday 19/03/15 | |||
| Venue: Alison Richard Building, Room S1 | |||
| 08:50-10:50 | Repeated games: Finitely repeated games without discounting; Infinitely repeated games with discounting; Trigger strategies and the Folk theorem; Application: Chainstore paradox | Ch. 14-15 | -- |
| Venue: Judge Business School, Computer Lab | |||
| 11:15-12:55 | Experimental Game Theory II [Slides] | -- | Link to www-experiment |
| Venue: Alison Richard Building, Room S1 | |||
| 14:00-16:00 | Group project presentations: Dynamic and repeated games | -- | Games: dollar auction (dynamic game); matching pennies (mixed strat.); iterated prisoner's dilemma Tools: 2x2 matrix games; centipede game |
| Friday 20/03/15 | |||
| Venue: Alison Richard Building, Room S1 | |||
| 08:50-10:50 | Games of incomplete information: Typology and expectation formation; Bayes-Nash equilibrium; Application: Adverse selection | Ch. 9-10 | -- |
| Venue: Judge Business School, Computer Lab | |||
| 11:15-12:55 | Experimental Game Theory III [Slides] | -- | Link to www-experiment |
| Tuesday 21/04/15, 12 noon, Submission deadline for essays. | |||
Assignments
By Tue, 03 March: Choose a research question
Project groups should choose a research question that they seek to answer by playing their assigned game with friends and other course participants. This question will ideally come from the students’ respective fields of study. Alternatively, students can choose to replicate findings from the corresponding paper from the literature list on this site. In any case, the question should be interesting and should have the potential to be answered with a laboratory experiment.
To develop a research question you can take a look at experiments that have already been conducted and consider small modifications of existing experiments. Read, for example, the journal Experimental Economics and look for improvements in the experiments that are presented there. You can also take a look at the website of the ESA who organizes conferences on experimental economics. There you will find abstracts of current research. More details can be found on the websites of the respective authors. Use these opportunities to inspire your research. It is often possible to combine two research ideas to a new research question.
Assignment [pass/fail]: Each project group will send us their research question and short answers to the following questions (1-2 pages) by Tue, 3rd March:
- What do you know about answers to this research question? Think about lectures you have heard, literature you can read, search the internet, etc… Have similar questions already been discussed in the literature? Which gap do you want to close with your study?
- What possibilities do you have to find an answer to this question? Include experimental and non-experimental methods.
- What are advantages and disadvantages of the experimental method?
- Is it possible that your experiment yields a surprising answer?
- Do you have an idea for an experimental design? Describe the details of your design.
- Is this the simplest possible design to answer your question?
These points should help you to find a good research question.
By Mon, 16 March: Prepare your presentation
During the following two weeks until the first session of the course you will prepare your presentation and define your research question more precisely. You will do more literature research to find out to which extent your question has already been answered and where you can fill a gap (studying the existing literature is inevitable at this point) to develop your experimental design.
Assignment [40% of final grade]: In the course you will present your research question and your experimental design to answer this question (20 minutes) as a group. At this point we will assume that you have conducted an extensive literature research and that you know the major findings of your research topic.
We find it important that participants actively contribute to discussions during the sessions.
The course will provide you with tools necessary to conduct your own www-experiments.
By Tue, 21 April: Conduct your experiment
In the following weeks you will incorporate the feedback from your presentation to refine the design for your experiment. You will conduct your experiment with other participants of the course and analyse the data.
Assignment [60% of final grade]: You will then submit your results in essay form as a group by Tue, 21 April (max. 6 pages, font: 12pt, spacing: 1.5, including references, figures and tables). The following questions should guide your exposition:
- What is the state of the art in your research field?
- What is your research question and why is it interesting?
- How did you conduct your experiment to answer this question? Why did you choose your design and no other? Which hypotheses do you want to test with this experiment?
- Which results did you observe in your experiment?
- Which conclusions do you draw? In which direction should further research go?
Reading
Textbook
- Osborne, M. (2009). An Introduction to Game Theory, Oxford University Press.
Research papers
- Bargaining Games
- Güth et al. (1982). An Experimental Analysis of Ultimatum Bargaining
- Bearden (2001). Ultimatum bargaining experiments: The state of the art
- Güth, Kirchkamp (2012). Will you accept without knowing what? The Yes-No game in the newspaper and in the lab
- Canonical Games
- Four case studies on canonical games in Wydick (2008), Games in Economic Development, Ch. 1-2 (password: Wydick)
- Dynamic and Repeated Games
- Shubik (1971). The Dollar Auction Game: A Paradox in Noncooperative Behavior and Escalation
- Chiappori et al. (2002). Testing Mixed-Strategy Equilibria When Players Are Heterogeneous: The Case of Penalty Kicks in Soccer
- Abbink et al. (2006). Group Size and Social Ties in Microfinance Institutions
You can help us improve this site. If you spot errors, typos, and inconsistencies in the course resources (website, slides, handouts, exercise sheets) or want to share ideas and interesting resources, please send us an email.