- Introduction to decision making
Choice; Preferences; Utility; Expected Utility; Updating beliefs; Bayes Rule.
Two-player games; Some examples of static games; Strategies; Common Knowledge and Rationality; Solving Games; Dominant Strategies; Iterated Elimination of Strictly Dominated Strategies; Applications e.g. Second price sealed bid auction.
Nash equilibrium; K-level thinking, Beauty Contests; Mixed Strategies; Games of Conflict and Cooperation; Applications e.g. Bertrand competition.
Dynamic Games; Game Trees; Solving dynamic games; Common Knowledge and Strategic Reasoning; Backward induction; Sub-game perfection; Reciprocity, cooperation, and punishment in repeated interactions; Tit-for-tat; Applications e.g. cartel formation.
- Fairness and Bargaining, Experiments in Strategic Interaction
Two person bargaining games; Trust and Punishment; Fairness; Reciprocity; Psychological Biases, Overconfidence; Experimental Evidence.
Auction as a market mechanism; sealed bid auctions (first & second price); English auction; Dutch auction; Optimal bidding strategies; Revenue equivalence; Winner’s curse; Other issues such as collusion, sniping etc.
Perfect competition; Monopoly; Oligopoly; Quantity (Cournot) competition; Price (Bertrand) competition; Collusion; Product differentiation; Hotelling model.
- Market Structure: Entry and Entry Deterrence. Vertical Relations
Describing market structure; C4-ratio; Herfindahl index; Barriers to entry and barriers to exit; Where do potential entrants come from; Strategic entry deterrence; Tactics and trade-offs; Judo Economics; Vertical Integration – make or buy?; Relation-Specific Assets and Hold-Up.
Pricing; Centralised prices vs auction; Network effects; Strategy and Market Dynamics; Peer to peer markets; Trust and Reputation mechanisms; Online Experiments.
- Competitive Advantage & Research and Development.
Value added; Market structure and R&D intensity; R&D rivalry; Monopolists’ and entrants’ R&D incentives; Benefits of the patent system.