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Syllabus: Economics 703, Advanced Microeconomics
Professor Peter Cramton
Tuesday and Thursday, 9:30 am to 10:45 am, Tydings 0111, Fall 2007
Course Description. Economics 703, Advanced Microeconomics, presents a formal
treatment of game theory. We begin with extensive-form games. A game tree is defined, as
well as information sets and pure, mixed and behavioral strategies. Existence of Nash
equilibria is discussed. We then turn to the analysis of dynamic games, covering repeated
games, finitely repeated games, the folk theorem for repeated games, subgame perfection,
and punishment strategies. Next, games with incomplete information are studied, including
direct revelation games, concepts of efficiency, and information transmission. Several
refinements of Nash equilibria are defined, such as sequential equilibria and stable equilibria. The analysis of enduring relationships and reputations
is covered. The course concludes with a discussion of two important applications of game
theory: auctions and bargaining. The topics include sealed-bid auctions, open auctions,
private valuation and common valuation models, the winner's curse, auction design,
multi-unit auctions, and combinatorial auctions.
Course Logistics. We will meet twice a week for one hour and fifteen minutes. There
are weekly problem sets and a final examination (8 am to 11 am, Friday, 14
December 2007). You are encouraged to do the problem sets as much as you can on your own;
however, you may wish to discuss the problem sets in small groups (two or three students).
The problem sets are sometimes quite difficult; you are not expected to be able to answer
all the questions correctly. Your course grade will be based 1/3 on the problem sets and
2/3 on the final exam. Good class participation can improve your evaluation. I expect you
to come to class prepared to respond intelligently to questions about the readings and
assignments.
Books and Readings. The main text for the course is Drew Fudenberg and Jean Tirole,
Game Theory, MIT Press (1991). I recommend that you purchase Vijay
Krishna, Auction Theory, Academic Press (2002), Paul Milgrom, Putting
Auction Theory to Work, Cambridge University Press (2004), and Peter Cramton, Yoav
Shoham, and Richard Steinberg, Combinatorial Auctions, MIT Press (2006). You may also wish to consult Martin Osborne and
Ariel Rubinstein, A Course in Game Theory, MIT Press (1994), which offers
excellent coverage of games without private information, and
Robert Gibbons, Game Theory for Applied Economists, Princeton University Press
(1992). In addition, I have included a set of lecture notes.
Office Hours. My office hours are Tuesday, 7:30 to 9:30 am. I am in
Tydings 4101A. You can also reach me by phone 301-405-6987 or email at
pcramton@gmail.com.
Outline
Notes, problem sets, and other course materials are available at www.cramton.umd.edu.
F&T = Fudenberg and Tirole, Game Theory;
K = Vijay Krishna, Auction Theory,
M = Paul Milgrom, Putting Auction Theory to Work,
O&R = Osborne and Rubinstein, A Course in Game Theory.
CSS = Peter Cramton, Yoav Shoham, and Richard Steinberg, Combinatorial
Auctions.
1. Strategic-Form Games
F&T, chapters 1 and 2; O&R, chapters 1 and 2.
2. Extensive-Form Games
F&T, chapter 3; O&R, chapter 6.
3. Repeated Games
F&T, chapters 4 and 5; O&R, chapter 8 and 9.
4. Bayesian Games and Bayesian Equilibrium
F&T, chapter 6.
5. Dynamic Games of Incomplete Information
F&T, chapter 8; O&R, chapter 11.
6. Refinements of Sequential Equilibrium
F&T, chapter 11; O&R, chapter 12.
7. Bargaining Theory
F&T, chapter 10; O&R, chapters 7, and 13-15.
8. Auction Theory
K chapters 1-17; M entire book; CSS entire book.
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