Strategies and Games, second edition Theory and Practice

The new edition of a widely used introduction to game theory and its applications, with a focus on economics, business, and politics.

This widely used introduction to game theory is rigorous but accessible, unique in its balance between the theoretical and the practical, with examples and applications following almost every theory-driven chapter. In recent years, game theory has become an important methodological tool for all fields of social sciences, biology and computer science. This second edition of Strategies and Games not only takes into account new game theoretical concepts and applications such as bargaining and matching, it also provides an array of chapters on game theory applied to the political arena. New examples, case studies, and applications relevant to a wide range of behavioral disciplines are now included. The authors map out alternate pathways through the book for instructors in economics, business, and political science.
 
The book contains four parts: strategic form games, extensive form games, asymmetric information games, and cooperative games and matching. Theoretical topics include dominance solutions, Nash equilibrium, Condorcet paradox, backward induction, subgame perfection, repeated and dynamic games, Bayes-Nash equilibrium, mechanism design, auction theory, signaling, the Shapley value, and stable matchings. Applications and case studies include OPEC, voting, poison pills, Treasury auctions, trade agreements, pork-barrel spending, climate change, bargaining and audience costs, markets for lemons, and school choice. Each chapter includes concept checks and tallies end-of-chapter problems. An appendix offers a thorough discussion of single-agent decision theory, which underpins game theory.

Prajit K. Dutta is Professor in the Department of Economics at Columbia University. Wouter Vergote is Lecturer in the Discipline Economics at Columbia University.

Preface xxiii
Part One Introductions 1
Chapter 1 A First Look at the Applications 3
Chapter 2 A First Look at the Theory 21
Part Two Strategic Form Games: Theory and Practice 39
Chapter 3 Strategic Form Games and Dominant Strategies 41
Chapter 4 Dominance Solvability 57
Chapter 5 Nash Equilibrium 75
Chapter 6 An Application: Cournot Duopoly 89
Chapter 7 Voting and Elections 107
Chapter 8 An Application: The Commons Problem 125
Chapter 9 Mixed Strategies 139
Chapter 10 Two Applications: Natural Monopoly and Bankruptcy Law 161
Chapter 11 Zero-Sum Games 179
Part Three Extensive Form Games: Theory and Applications 199
Chapter 12 Extensive Form Games and Backward Induction 201
Chapter 13 An Application: Research and Development 225
Chapter 14 Subgame Perfect Equilibrium 239
Chapter 15 Fintely Repeated Games 257
Chapter 16 Infinitely Repeated Games 277
Chapter 17 An Application: Competition and Collusion in the NASDAQ Stock Market 295
Chapter 18 An Application OPEC 309
Chapter 19 An Application: Logrolling and Pork-Barrel Spending 329
Chapter 20 An Application: Trade Agreements 345
Chapter 21 Dynamic Games with an Application to Global Warming 363
Chapter 22 Strategic Bargaining 385
Part Four Asymmetric Information Games: Theory and Applications 403
Chapter 23 Moral Hazard and Incentives Theory 405
Chapter 24 Games with Incomplete Information 423
Chapter 25 Mechanism Design, The Revelation Principle, and Sales to an Unknown Buyer 447
Chapter 26 An Application: Auctions 465
Chapter 27 An Application: Price Competition with Cost Uncertainty 481
Chapter 28 Signaling Games and the Lemons Problem 501
Chapter 29 An Application: Crisis Bargaining and Escalation 521
Part Five Cooperative Games and Matching 541
Chapter 30 Cooperative Games 543
Chapter 31 Matching Problems 567
Part Six Foundations 593
Chapter 32 Calculus and Optimization 595
Chapter 33 Probability and Expectation 613
Chapter 34 Utility and Expected Utility 625
Chapter 35 Existence of Nash Equilbria 641
Index 655