4EK602 Games and Decisions

Aims of the course:

The theory of games represents a theoretical background for optimal behavior in economic decision-making situations with more participants. This course examines game-theoretic concepts, models of conflicts, and basic computational algorithms.

Learning outcomes and competencies:

Upon successful completion of this course, students will be able to describe and solve decision-making situations with more participants. They will also be able to find optimal solutions in decisions under risk and uncertainty.

Course contents:

  1. Decision situations with more participants.Mathematical models of conflicts and cooperation and its classification. Games in normal form.
  2. Constant-sum games. Matrix games. Dominated strategy. Definition of Nash equilibrium.
  3. Nash equilibrium in mixed strategies. Basic theorem on matrix games.
  4. Non-constant-sum games. Bimatrix games and their economic applications. Prisoner’s dilemma, Battle of sexes, Chicken.
  5. Auctions, sealed bid auctions. Multiple objects auctions.
  6. Non-cooperative model of oligopoly. Cooperative model of oligopoly, characteristic function, Shapley value.
  7. Coalitions, coalition structures, core of the game.
  8. Decisions under risk and uncertainty. P-intelligent players. Petersburg paradox, utility functions of money, lotteries, and insurance policies.
  9. Games in extensive form. Chess, NIM, Russian Roulette.
  10. Bargaining theory.
  11. Advanced models of game theory.