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Overview
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Game theory is a set of tools for studying situations in which decision-makers (like consumers, firms, politicians, and governments) interact. This course provides an introduction to game theory, with a strong emphasis on applications in economics. The objective of the course is to give students an understanding of the core concepts of game theory and how to use them to understand economic, social, and political phenomena.

Game theory is an anlytical subject, and an ability to follow logical arguments—including some that are complex—is required to follow the material. The only way to absorb analytical material is to work through problems. I will assign weekly problem sets; to keep up with the course it is essential that you complete them.

I will cover the following topics.

  • Strategic games; Nash equilibrium.
  • Cournot's and Bertrand's models of duopoly
  • Hotelling's model of electoral competition; the citizen-candidate model
  • Dominated strategies; iterated elimination of dominated strategies and common knowledge of rationality
  • Mixed strategy Nash equilibrium
  • Strategic games with imperfect information; auctions, models of public good provision
  • Extensive games; subgame perfect equilibrium
  • Ultimatum game, holdup game
  • Matching and the deferred acceptance algorithm
  • Repeated games; collusion in repeated duopoly

Books

I know of no book that fits the course perfectly. I will refer you a lot to my book
An introduction to game theory (Oxford University Press, New York, 2003)
although the level of some parts of that book is a bit higher than the level of the course. I plan to provide supplementary notes as necessary. Another book that covers some, but not all of the topics in the course, at approximately the same level, is
R. Gibbons, Game theory for applied economists (Princeton University Press, 1992).

Important announcement from Associate Chair, Undergraduate Studies

You are reminded that you can take only one (NOT both) of ECO316H and ECO326H, no matter how appealing you find game theory.
  1. ECO316H and ECO326H are exclusions for each other -- that means you cannot take both courses towards your degree.
  2. ECO316H cannot be counted towards any program that requires ECO326H. In other words, if you need to take ECO326H for your program, you cannot take ECO316H.
  3. The Department of Economics will not remove students from courses that are exclusions. However, when the time comes to graduate and courses are counted, the rules will be enforced, and exclusions will not count toward the degree or program. Students are expected to comply with the rules of the calendar when they choose their courses.
More information about the two courses is available at http://www.artsandscience.utoronto.ca/ofr/calendar/crs_eco.htm#ECO316H1 and http://www.artsandscience.utoronto.ca/ofr/calendar/crs_eco.htm#ECO326H1.