Game Theory for Applied Economists Book

1	Static Games of Complete Information	1
1.1	Basic Theory: Narmal-Form Games and Nash Equilibrium	2
1.1.A	Normal-Form Representation of Games	2
1.1.B	Iterated Elimination of Strictly Dominated Strategies	4
1.1.C	Motivation and Definition of Nash Equilibriuin	8
1.2	Applications	14
1.2.A	Cournot Model of Duopoly	14
1.2.B	Bertrand Model of Duopoly	21
1.2.C	Final-Offer Arbitration	22
1.2.D	The Problem of the Commons	27
1.3	Advanced Theory: Mixed Strategies and Existence of Equilibriutn	29
1.3.A	Mixed Strategies	29
1.3.B	Existence of Nash Equilibrium	33
2	Dynamic Games of Complete Information	55
2.1	Dynamic Games of Complete and Perfect Information	57
2.1.A	Theory: Backwards Induction	57
2.1.B	Stackelberg Model of Duopoly	61
2.1.C	Wages and Employment in a Unionized Firm	64
2.1.D	Sequential Bargaining	68
2.2	Two-Stage Games of Complete but Imperfect Information	71
2.2.A	Theory: Subgame Perfection	71
2.2.B	Bank Runs	73
2.2.C	Tariffs and Imperfect International Competition	75
2.2.D	Tournaments	79
2.3	Repeated Games	82
2.3.A	Theory: Two-Stage Repeated Games	82
2.3.B	Theory: Infinitely Repeated Games	88
2.3.C	Collusion between Cournot Duopolists	102
2.3.D	Efficiency Wages	107
2.3.E	Time-Consistent Monetary Policy	112
2.4	Dynamic Games of Complete but Imperfect Information	115
2.4.A	Extensive-Form Representation of Games	115
2.4.B	Subgame-Perfect Nash Equilibriuin	122
3	Static Games of Incomplete Information	143
3.1	Theory: Static Bayesian Ganies and Bayesian Nash Equilibrium	144
3.1.A	An Example: Cournot Competition under Asymmetric Information	144
3.1.B	Normal-Form Representation of Static Bayesian Games	146
3.1.C	Definition of Bayesian Nash Equilibrium	149
3.2	Applications	152
3.2.A	Mixed Strategies Revisited	152
3.2.B	An Auction	155
3.2.C	A Double Auction	158
3.3	The Revelation Principle	164
4	Dynamic Games of Incomplete Information	173
4.1	Introduction to Perfect Bayesian Equilibrium	175
4.2	Signaling Games	183
4.2.A	Perfect Bayesian Equilibrium in Signaling Games	183
4.2.B	Job-Market Signaling	190
4.2.C	Corporate Investment and Capital Structure	205
4.2.D	Monetary Policy	208
4.3	Other Applications of Perfect Bayesian Equilibrium	210
4.3.A	Cheap-Talk Games	210
4.3.B	Sequential Bargaining under Asymmetric Information	218
4.3.C	Reputation in the Finitely Repeated Prisoners' Dilemnia	224
4.4	Refinements of Perfect Bayesian Equilibrium	233
	Index	257