APPLICATION FORM FOR

H3 COURSE “GAME THEORY AND COMPETITION” JANUARY 2012 INTAKEFOR A-LEVELS ECONOMICS

Deadline for Application : Friday 28 October 2011

Personal Particulars

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Please indicate your preferred day for the H3 course with a tick ().

[ ] Wednesdays 2.00pm – 4.45pm

OR

[ ] Wednesdays 4.45pm – 7.30pm

OR

[ ] Fridays 2.00pm – 5.00pm

OR

[ ] Saturdays 8.00am – 11.00 am

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Please submit your completed Application Form together with a copy of your JC1 Promotional Examination Results Slip and your O-levels Certificate by the abovementioned deadline to your H3 teacher-in-charge in your junior college, and they will pass your application form to us.

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HIGHER 3 PROGRAMME FOR A LEVEL ECONOMICS

ECON 106Z GAME THEORY AND COMPETITION

January 2012

Instructor Professor Winston T H Koh Office: #050-033School of Economics 90 Stamford RoadTel: 6828-0853Email: winstonkoh@smu.edu.sg

Course Objectives

Economic agents with divergent objectives and interests often compete against one another in a variety of situations. For instance, companies compete for customers and production rights, countries compete for foreign investments and over trade quotas, co-workers compete for promotions, graduates compete for jobs and contestants on game shows compete for prize money. These agents may have identical or different strategic options open to them and may possess common information and/or private knowledge that could place them at an advantage relative to their rivals.

This H3 course builds on the H2 Economics Syllabus for Economics: specifically, Section 1.3 – Firms and How They Operate.

The course will introduce students to basic concepts and principles of game theory, with applications to market competition, business and other aspects of economic life. Students will learn the application of a game-theoretic framework to analyze market competition and resource allocation that are directly relevant to the H2 Economics syllabus. Furthermore, they will be able to use the concepts of prisoners’ dilemma, Nash equilibrium and mixed strategies to analyze a wide range of economic problems.

This course introduces the students to basic concepts and principles of game theory, with applications to business, politics and social sciences. The course stresses conceptual understanding and problem solving, and will equip students with a better appreciation of the strategic interactions present in different types of economic activities.

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Course Structure

Class-room sessions : 12 lessons starting in January 2012. There will be 4 classes: Wednesday (2.00 pm to 4.45 pm, and 4.45 pm to 7.30 pm), Friday (2.00 pm to 5.00 pm), and Saturday (8.00 am to 11.00 am).

Assignments and independent study : There will be weekly homework and readings assigned to students for independent study. Students may consult the professor and the teaching assistant to review the material taught in class.

Mid-term test : It will be a closed-book test, 2.5 hours in duration, 3 multi-part questions, with structured problems and free-response questions.

Final Examination : A closed book written examination (3 hours). It will consist of structured problems and free-response questions.

Assessment & Evaluation

Class participation 5%Mid Term Test 25%Final examination 70%

Required Text

Avinash K. Dixit and Susan Skeath, Games of Strategy, Third Edition, Norton, 2009

Other Readings and References

Avinash K. Dixit and Barry J. Nalebuff, Thinking Strategically, Norton, 1991

Eric Rasmusen, Games and Information: An Introduction to Game Theory, Basil Blackwell, 2007

Thomas C. Schelling, The Strategy of Conflict, Harvard University Press, 1980

Herbert Gintis, Game Theory Evolving, Princeton University Press, 2009

H. Scott Bierman and Luis Fernandez, Game Theory with Economic Applications, 2nd Edition, Addison Wesley, 1998

Joel Watson, An Introduction to Game Theory, Norton, 2008

Robert Gibbons, Game Theory for Applied Economists, Princeton, 1992

Note: All the supplementary references listed above will be made available at the Course Reserve Section, in the SMU Library, for the duration of the course.

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Course Outline and Schedule (Venue: Seminar Room 5.2, SOE/SOSS Building)

Topics Dixit and Skeath

1 Strategic Thinking with game theory What is a game of strategy? Rules of the Game Decisions versus tactics

Ch 1, 2

2 Game with sequential moves Drawing game trees Backward Induction Rollback equilibrium

Ch 3

3 Games with simultaneous moves Nash equilibrium Continuous variables

Ch 4, 5

4 Games of dynamic competition Combining sequential and simultaneous moves Applications to business and politics

Ch 6

5 Simultaneous-move games with mixed strategies Beliefs and Responses Games with more than two strategies

Ch 7, 8

6 The Prisoners’ Dilemma Repeated interactions Applications to Politics, Evolutionary Biology

Ch 11

7 Revision and Mid-term Test

8 Uncertainty and Information Strategies to manipulate information Screening versus signaling

Ch 9

9 Entry Deterrence under Asymmetric Information Separating, Pooling and Semi-separating

Equilibrium

Ch 9

10 Games with strategic moves Commitment, threats and promises: Applications: US-Japan trade relations Brinkmanship

Ch 10, 14

11 Introduction to Auction Theory Private-values auction model Common-values auction model

Ch 16

12 Revision and Class Exercises

13 Final Examination

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