The economic relationships between a small number of agents escape the classical framework of perfect competition because each individual’s decisions have global consequences for the economy which the individual can apprehend. Thus a company internalises the impact of its production decisions in a concentrated market such as a duopoly, a monetary authority envisages the impact its policies will have on agents’ expectations and its long-term credibility, a trade union takes account of the dissuasive value of a strike threat in pay negotiations with a company, etc.
The methodological tool that can deal with these problems is game theory. This tool is the basis of a growing number of recent economic developments, whether in industrial economics, macroeconomics, international economics, employment economics or public economics. For this reason, game theory is indispensable to the modern economist.
The course offers an introduction to the concepts and methods of game theory as they apply to economics. The emphasis will be less on the properties of the mathematical objects used than on their conceptual content and their applicability in economic terms. In particular, illustrations will be presented in various economic fields to demonstrate the usefulness and universality of these concepts.
- Games in normal form– Strategies, Nash equilibria, examples.
- Games in extensive form– Strategies, Nash equilibria, concept of information.
- Dynamics– Perfection and its application to negotiation theory. Folk theorems and their application to cartel theory. Markovian hypothesis in games with state variables, inheritance games.
- Informational problems– Bayesian games, Bayesian equilibria. Auctions. Implementation and examples of public economics
- Dynamics and information– Equilibria and refinements. Reputation. Signalling, application to the employment market
DEMANGE, G et J.-P. PONSSARD, (1994), Théorie des jeux et analyse économique, PUF [15 DEM 00 A]FUDENBERG, D et J. TIROLE, (1991), Game Theory, MIT Press [64 FUD 00 A]GIBBONS, R., (1993), A Primer in Game Theory [63 GIB 00 A]KREPS, D., (1990), Game Theory and Economic Modelling, Oxford Univ. Press [63 KRE 00 C]MYERSON, R., (1991), Game Theory : Analysis of conflict, Harvard University Press [15 MYE 00 A]OSBORNE, M. et A. RUBINSTEIN, (1994), A course in Game Theory, Academic Press [15 OSB 00 A]