This textbook offers a
systematic, self-contained account of the main contributions of modern game theory and its
applications to economics. Starting with a detailed description of how to model strategic
situations, the discussion proceeds by studying basic solution concepts, their main
refinements, games played under incomplete information, and repeated games. For each of
these theoretical developments, there is a companion set of applications that cover the
most representative instances of game-theoretic analysis in economics, e.g. oligopolistic
competition, public goods, coordination failures, bargaining, insurance markets,
implementation theory, signaling and auctions. The theory and applications covered in the
first part of the book fall under the so-called 'classical' approach to game theory,
which is founded on the paradigm of players' unlimited rationality. The second part
shifts towards topics that no longer abide by that paradigm. This leads to the study of
topics such as the interplay between evolution and rationality.
Table of Contents
Part I. Theoretical
Framework: 1.1 Introduction and examples; 1.2 The representation of a game in extensive
form; 1.3 The representation of a game in strategic form; 1.4 The mixed extension of a
game; 1.5 Mixed and behavioral strategies; 1.6 Representation in coalition form; Summary;
Exercises;
Part II. Strategic-Form
Analysis: Theory: 2.1 Dominance and iterative dominance; 2.2 Nash equilibrium; 2.3
Zero-sum bilateral games; 2.4 Nash equilibrium: formal existence results; 2.5 Strong and
coalition-proof equilibrium; 2.6 Correlated equilibrium; 2.7 Rationalizability; Summary;
Exercises;
Part III. Strategic-Form
Analysis:Applications: 3.1 Oligopoly (I): static models; 3.2 Mechanism design (I):
efficient allocation of public goods; 3.3 Mechanism design (II): Nash implementation; 3.4
Markets (I): macroeconomic coordination failures; Summary; Exercises;
Part IV. Refinements of Nash
Equilibrium: Theory: 4.1 Introduction; 4.2 Refinements excluding 'incredible threats':
examples; 4.3 Subgame-perfect equilibrium; 4.4 Weak-perfect Bayesian equilibrium; 4.5
Refinements excluding 'untenable beliefs': examples; 4.6 Sequential equilibrium; 4.7
Perfect and proper equilibria; 4.8 Strategic-form refinements; Summary; Exercises;
Part V. Refinements of Nash
Equilibrium: Applications; 5.1 Oligopoly (II): sequential moves; 5.2 Markets (II):
decentralized price formation; 5.3 Oligopoly (III): differentiated products; 5.4 Mechanism
design (III): efficient allocation of an indivisible object; Summary, Exercises;
Part VI. Incomplete
Information: Theory: 6.1 Introduction and examples; 6.2 Bayesian games; 6.3 Bayes-Nash
equilibrium; 6.4 Signalling games; 6.5 Mixed strategies revisited: a purification
approach; 6.6 Forward induction; Summary; Exercises;
Part VII.. Incomplete
Information: Applications: 7.1 Markets (III): signalling in the labor market; 7.2 Markets
(IV): insurance markets and adverse selection; 7.3 Mechanism design (IV): one-sided
auctions; 7.4 Mechanism design (V): buyer-seller trade; Summary; Exercises;
Part VIII.. Repeated
Interaction: Theory: 8.1 Introduction and examples; 8.2 Repeated games: basic theoretical
framework; 8.3 Folk theorems: Nash equilibrium; 8.4 Reputation and 'irrationality':
informal discussion; 8.5 Folk theorems: subgame=perfect equilibrium; 8.6 Reputation and
'irrationality': formal analysis; Summary; Exercises;
Part IX. Repeated
Interaction: Applications: 9.1 Oligopoly (IV): intertemporal collusion in a Cournot
scenario; 9.2 Oligopoly (V): intertemporal collusion in a Bertrand scenario; 9.3 Markets
(V): efficiency, wages and unemployment; Summary; Exercises;
Part X. Evolutionary
Foundations of Equilibrium: 10.1 Introduction; 10.2 Static analysis; 10.3 Basic dynamic
analysis; 10.4 Evolution in social environments; 10.5 The evolution of cooperation: an
example; Summary; Exercises; Part XI. Learning to Play: 11.1 Introduction; 11.2
Reinforcement learning; 11.3 Static perceptions and Nash equilibrium; 11.4 Memory,
expectations and foresight; Summary; Exercises;
Part XII. Social Learning
and Equilibrium Selection; 12.1 Introduction; 12.2 Evolutionary games: theoretical
framework; 12.3 Evolutionary games: alternative scenarios; 12.4 Stochastic stability and
equilibrium selection; 12.5 Experimental evidence; 12.6 Perturbed Markov processes: basic
concepts and techniques; 12.7 Reinforcement learning with flexible aspirations; Summary;
Exercises.
510 pages