4EK602 Games and Decisions

Aims of the course:

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

Learning outcomes and competences:

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 Rulette.
  10. Bargaining theory.
  11. Advanced models of game theory.