BE 510: Business Economics I
Contents
This module will provide an extended introduction to non-cooperative game theory at an intermediate level. Strategic decision making and relevant solution concepts for games of complete and incomplete information will be covered in detail. An important aim is to convey an understanding and a working analytical knowledge of how situations of a strategic nature can be modeled. The course will put particular emphasis on the ability to apply relevant game-theoretical concepts correctly.
Learning outcomes
On completion of the module, students will have acquired an advanced understanding of model-based analytical methods and arguments in microeconomics. They will have gained familiarity with relevant game-theoretical concepts under both full and incomplete information. They will be able to derive and interpret equilibria, reason about beliefs and sequential rationality, understand the role of refinements, and analyze static and dynamic games. They will also be able to communicate game-theoretic arguments clearly in both algebraic and verbal form.
Necessary prerequisites
–
Recommended prerequisites
Knowledge of introductory microeconomics at bachelor level; familiarity with calculus.
| Forms of teaching and learning | Contact hours | Independent study time |
|---|---|---|
| Lecture | 2 SWS | 8 SWS |
| Exercise class | 2 SWS | 5 SWS |
| ECTS credits | 6 |
| Graded | yes |
| Workload | 180h |
| Language | English |
| Form of assessment | Written exam (90 min) |
| Restricted admission | no |
| Further information | – |
Examiner Performing lecturer |  | Prof. Dr. Henrik Orzen Prof. Dr. Henrik Orzen |
| Frequency of offering | Fall semester |
| Duration of module | 1 semester |
| Range of application | M.Sc. MMM, M.Sc. WiPäd |
| Preliminary course work | – |
| Program-specific Competency Goals | CG 1, CG 2 |
| Literature | Tadelis, S. (2012). Game Theory: An Introduction. Princeton University Press. Chiang, A.C. & Wainwright, K. (2005). Fundamental Methods of Mathematical Economics. McGraw-Hill. |
| Course outline | 1. Games – Nash equilibrium and other solution concepts (fundamental ideas, methods, and assumptions; normal form; dominance and iterated dominance; best response; Nash equilibrium). 2. Dynamic games (extensive form; singletons and information sets; perfect and imperfect information; subgame-perfect equilibrium. repeated interaction). 3. Continuous and mixed strategies (Nash equilibrium in settings with infinitely many courses of action; randomizing over pure strategies; properties of mixed strategy equilibria). 4. Static games of incomplete information (notion of incomplete information; Bayes-Nash equilibrium; examples). 5. Beliefs and Bayes’ rule (concept of beliefs in game theory; Bayes’ rule and how to apply it). 6. Perfect Bayesian Equilibrium (limits of the concept of Subgame-Perfect Equilibrium; Perfect Bayesian Equilibrium as a solution concept; sequential rationality). 7. Signaling Games (sequential-move games with incomplete information; pooling and separating equilibria; screening). |