OBJECTIVE

This course in designed as an introduction to individual decision-making. We begin with an experiment including several basic decision problems and games. The results of this experiment will be compared with the solutions offered by decision theory and game theory. When the standard economic theory does not fit the data some alternative approaches will be introduced.

CONTENT

1. Introduction

1.1 Problems we solve everyday

1.2 The experiment (Note: This is not an exam)

2. Individual decision-making

2.1 Basic concepts: Values and preferences

2.2 Choice under uncertainty: Lotteries and risk aversion

2.3 Decision trees and backward induction

3. Basic topics in game theory

3.1 What is a game?

3.2 Types of games

3.3 Solution concepts: Dominant strategies, Nash equilibrium, Subgame perfect equilibrium.

4. Compare the results of the experiment and the predictions of the theory

4.1 What does the theory not reflect?

5. Alternative approaches

5.1 Psychology

5.2 Evolution

5.3 Artificial intelligence

6. Applications of game theory to other fields: sociology, politics, biology etc.

Bibliography:

Gibbons R. (1992) A primer in game theory Pearson Higher Education

Roy Gardner (1995) Games for Business and Economics New York: Wiley

Varian H (1999) Intermediate Microeconomics W. W. Norton & Company