Game Theory Interactive Strategies in Economics and Management 1st edition by Aviad Heifetz – Ebook PDF Instant Download/Delivery: 0521176042, 978-0521176040
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ISBN 10: 0521176042
ISBN 13: 978-0521176040
Author: Aviad Heifetz
Game theory is concerned with strategic interaction among several decision-makers. In such strategic encounters, all players are aware of the fact that their actions affect the other players. Game theory analyzes how these strategic, interactive considerations may affect the players’ decisions and influence the final outcome. This textbook focuses on applications of complete-information games in economics and management, as well as in other fields such as political science, law and biology. It guides students through the fundamentals of game theory by letting examples lead the way to the concepts needed to solve them. It provides opportunities for self-study and self-testing through an extensive pedagogical apparatus of examples, questions and answers. The book also includes more advanced material suitable as a basis for seminar papers or elective topics, including rationalizability, stability of equilibria (with discrete-time dynamics), games and evolution, equilibrium selection and global games.
Game Theory Interactive Strategies in Economics and Management 1st Table of contents:
PART I: Strategic interactions as games
INTRODUCTION
1: Strategic form games
1.1 Representation in negotiations over a business partnership
1.2 Definition of a strategic form game
2: Representing strategic interactions with games
2.1 The background to the Six Day War
2.1.1 The circumstances on the eve of the war
2.1.2 Presentation of the circumstances as a game
Israel’s preferences
Egypt’s preferences
2.2 Competing for promotion
2.2.1 Analyzing the game
2.3 Teamwork incentives
2.4 Discussion
Part II: Basic solution concepts for strategic form games
INTRODUCTION
3: Dominant strategies
3.1 Strongly dominant strategies
3.2 Solution of the game with strongly dominant strategies
3.2.1 A social dilemma
3.2.1.1 The Prisoner’s Dilemma
3.3 Weakly dominant strategies
3.3.1 Second price auction
3.3.1.1 Example: eBay
3.3.2 Political contest and the median voter theorem
Theorem 3.1: The median voter theorem
Proof
4: Strongly dominated strategies
4.1 The definition of a strongly dominated strategy
Two numerical examples
4.2 Iterative elimination of strongly dominated strategies
4.2.1 Iterative elimination – the general case
5: Weakly dominated strategies
5.1 Iterative elimination of weakly dominated strategies
5.1.1 Price competition
5.1.2 “Beauty contest”
5.1.2.1 “Beauty contest” in laboratory experiments
5.1.3 The Traveler’s Dilemma
5.1.4 A voting paradox
5.2 Changes in the order of elimination of weakly dominated strategies
6: Nash equilibrium
6.1 Battle of the Sexes
6.2 Definition of Nash equilibrium
6.3 Focal point equilibrium
6.3.1 Divvying up the Jackpot
6.4 Finding a Nash equilibrium
6.4.1 Partnership
6.4.2 Finding a Nash equilibrium in games with a continuum of strategies
Part III: Prominent classes of strategic form games
INTRODUCTION
7: Cooperation and conflict, strategic complements and substitutes
7.1 Investing in a public good
7.1.1 Investment in a public good in laboratory experiments
7.2 The tragedy of the commons
7.2.1 The greenhouse effect
7.2.2 Coping with the tragedy of the commons
7.2.2.1 Pollution Permits Exchange
7.3 Patent race
7.4 Crime and enforcement policy
8: Concentrated markets
8.1 The Cournot model: competition in quantities
8.1.1 Quantity competition with differentiated products
8.2 Bertrand’s model: price competition
8.2.1 Price competition with differentiated products
8.3 Competition or collusion?
9: Coordination games and strategic uncertainty
9.1 The Stag Hunt game
9.1.1 Whale hunting
9.1.2 Laboratory experiments of the Stag Hunt game
9.2 Keyboard arrangement
9.3 Video cassette recording technology
9.4 Consumer network externalities
9.5 Job search and unemployment
Part IV: Uncertainty and mixed strategies
INTRODUCTION
10: Choice under uncertainty and risk dominance
10.1 Monetary payoffs and risk neutrality
10.2 Von Neumann–Morgenstern preferences and the Allais Paradox
10.3 Risk dominance
11: Mixed strategies
11.1 The Matching Pennies game
11.2 Finding a Nash equilibrium in mixed strategies
11.2.1 The Battle of the Sexes
11.3 Mixed strategies in laboratory experiments
11.4 Three possible interpretations of a Nash equilibrium in mixed strategies
11.4.1 Equilibrium in predictions
11.4.2 Simple rules of thumb in repeated games
11.4.2.1 Tennis serves
11.4.2.2 Tennis serves in practice
11.4.2.3 Penalty kicks in soccer
11.4.2.4 Soccer penalty kicks in practice
11.4.3 Population games
Appendix: Proving the existence of a Nash equilibrium in mixed strategies
Theorem 11.1: Kakutani’s fixed point theorem
12: Security strategies, strictly competitive games.and the minimax theorem
12.1 Security strategies
12.1.1 Example
12.1.2 Definition of a security strategy
12.1.3 The payoff at a Nash equilibrium as compared with the payoff guaranteed by a security strateg
Proposition 12.1
Proof
12.2 Strictly competitive games and zero sum games
Theorem 12.1
Proof
12.3 The minimax theorem
Theorem 12.2: The minimax theorem
Proof
12.3.1 Comments on the minimax theorem
13: Mixed strategies in general games
13.1 The Volunteer’s Dilemma
13.2 Mixed strategies in games with more than two pure strategies per player
13.2.1 Rock-Paper-Scissors
Appendix: Patent race – an additional model
13.3.1 The patent race in laboratory experiments
Part V: Advanced topics in strategic form games
INTRODUCTION
14: Rationalizable strategies
14.1 A never-best-reply strategy
14.1.1 Example: a never-best-reply strategy which is nevertheless not a dominated strategy
Proposition 14.1
(Pearce 1984, Bernheim 1984)
14.2 Rationalizable strategies
Appendix: Proof of Proposition 14.1
15: Stability of equilibria
15.1 Updating processes
15.1.1 Eductive processes
15.1.2 Actual updating processes
15.2 Dynamical systems
15.2.1 Examples of games in which only some of the equilibria are stable
16: Games and evolution
16.1 The replicator dynamics
16.1.1 The Hawk-Dove game
16.2 The fixed points of the replicator dynamics and Nash equilibrium
Proposition 16.1
16.2.1 Social dilemma
16.2.2 The Stag Hunt game
16.2.3 Rock-Paper-Scissors
16.2.3.1 Lizards play Rock-Paper-Scissors
16.3 Evolutionarily stable strategies
Proposition 16.2 (an equivalent definition of an evolutionarily stable strategy)
Proof
16.3.1 Example of an equilibrium strategy that is not evolutionarily stable
16.3.2 A weakly dominated strategy is not evolutionarily stable
16.4 Evolutionary stability versus stability in the replicator dynamics
Appendix A: The Hawk-Dove game
Appendix B: Proof of Proposition 16.1
17: Global games
17.1 Equilibrium selection criteria
17.2 Global games
17.2.1 Attacks on currency exchange rates
17.3 Global games in laboratory experiments
Part VI: Dynamic games
INTRODUCTION
18: Extensive form games
18.1 The game tree
18.2 Strategies in extensive form games
18.2.1 The strategic form of an extensive form game
19: Non-credible threats, subgame perfect equilibrium and backward induction
19.1 Subgames of an extensive form game
19.2 Subgame perfect equilibrium
19.3 Backward induction
19.3.1 Quantity competition with a leading firm– the Stackelberg model
19.3.2 The publisher’s dilemma– pricing over time
20: Commitment
20.1 Commitment to action
20.1.1 Investment in a public good with a leading player
20.1.2 Partnership with a leading player
20.1.3 Patent race with a leading firm
20.2 Commitment to reaction
20.2.1 Branding
20.2.2 Entry deterrence
20.2.3 Government subsidies for production
20.3 Simultaneous commitment
20.3.1 Advertising
20.3.2 Subsidies and quotas in international trade
21: Backward induction: limitations and difficulties
21.1 The ultimatum game
21.1.1 The ultimatum game in laboratory experiments
21.1.2 The ultimatum game in anthropological studies
21.2 The centipede game
21.2.1 The centipede game in laboratory experiments
Appendix: Fair divisions and stochastic stability
22: Moves of nature
22.1 The ultimatum game with a random responder type
22.2 Brinkmanship
22.2.1 The Cuban missile crisis
22.3 Nuisance suits
Part VII Repeated games
INTRODUCTION
23: The repeated Prisoner’s Dilemma
23.1 Repeated games
23.2 The repeated Prisoner’s Dilemma
23.2.1 The repeated Prisoner’s Dilemma in laboratory experiments
23.3 Partial cooperation
23.4 The one-deviation principle in repeated games
Theorem 23.1
Proof
23.5 Equilibrium payoffs
Theorem 23.2: The folk theorem for the repeated Prisoner’s Dilemma
Theorem 23.3: Friedman’s folk theorem (1971)
23.6 Renegotiation proofness
24: Games with an unbounded horizon: additional models and results
24.1 Efficiency wages
24.2 Stable cartel
24.3 Sequential bargaining
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