Vincent Crawford (Economics 319, 534-3452)

This offering of Economics 201A, Behavioral Game Theory, will discuss the leading alternative approaches to analyzing strategic behavior--noncooperative game theory, cooperative game theory, evolutionary game theory, and adaptive learning models--focusing on games with symmetric information. There are two main goals: (i) to introduce the leading approaches and the modeling issues they address; and (ii) to examine their performance in the light of empirical evidence on strategic behavior, in the hope of moving closer to the kind of understanding needed to analyze strategic interactions in economics and related fields. Most of the empirical evidence will come from laboratory experiments; but the course will emphasize theory rather than experimental methods. Although the topics to be discussed are close to those considered in my Winter 1996 offering of 201B, Theory and Experiment in the Analysis of Strategic Interaction, this shift in emphasis will reduce the correlation between the material covered in the courses to roughly 50%.

 Organization: The course will meet from 10:30-11:50 on Mondays and Wednesdays in Room 300 of the Economics Building, with the first class on Monday, September 29. My office hours will be Mondays from 9:00-10:00 in Economics 319, but you can also see me (preferably by appointment) at other times. Students have two enrollment options. Those who just want to sit in should enroll on an S/U basis; there will then be no formal requirements. Those who want a grade should enroll for one; they must either take an in-class final at a time in exam week to be determined or write a 10-15 page paper on a topic to be agreed on with me by the 5th week and turned in by the beginning of exam week. If you are a student who plans to attend, please enroll one way or the other (this will help the Department convince the administration that graduate electives are worth offering). There is no formal text, but I have ordered some books that give useful background for the bookstore:

Thomas Schelling, The Strategy of Conflict, Oxford 1960 or Harvard 1980

David Kreps, Game Theory and Economic Modelling, Oxford 1990

Robert Gibbons, Game Theory for Applied Economists, Princeton 1992

Ken Binmore, Fun and Games, Heath 1992

John Kagel and Alvin Roth, editors, Handbook of Experimental Economics, Princeton 1995
 
 

There are useful general discussions of game theory in (exactly) two of your first-year texts:

Chapters 7-9 of Andreu Mas-Colell, Michael Whinston, and Jerry Green, Microeconomic Theory,

Oxford 1995

Chapters 11-15 of David Kreps, A Course in Microeconomic Theory, Princeton 1990

Outline and Readings: The outline divides the leading approaches into two sections: Static (noncooperative and cooperative game theory) and Dynamic (evolutionary game theory and adaptive learning models). Static theories are those whose predictions can be evaluated without considering changes in behavior in repeated play of the game the theory makes predictions for. (For instance, an equilibrium analysis of a repeated game would be classified as static because it does not consider changes in players' repeated-game strategies.) Each of these sections has Theory and Evidence subsections. I have listed more things than we can possibly discuss in class. The most important readings are marked with an asterisk (*); those on reserve are marked with a cross (+).

I. Static Approaches

A. Structured interactions and noncooperative game theory

1. Theory

a. Extensive and normal forms; structure versus context

b. Nash equilibrium and related notions (dominance, iterated dominance, dominance-solvability, rationalizability, pure- and mixed-strategy equilibrium, equilibrium in beliefs)

c. Equilibrium selection (trembling-hand perfectness, subgame-perfectness, forward induction, risk- and payoff-dominance, Harsanyi and Selten's general theory)

d. Deductive rationales for equilibrium and equilibrium selection; strategic sophistication and strategic uncertainty

*+pp. 206-211 (sections 1, 2, 2.1, and 2.2) of Vincent Crawford, "Theory and Experiment in the Analysis of Strategic Interaction," 206-242 (chapter 7) in David Kreps and Ken Wallis, editors, Advances in Economics and Econometrics: Theory and Applications, Seventh World Congress, Vol. I, Cambridge 1997

*+pp. 265-284 of Vincent Crawford, "Thomas Schelling and the Analysis of Strategic Behavior," 265-294 (chapter 7) in Richard Zeckhauser, editor, Strategy and Choice, MIT 1991

*in this space, put your favorite discussions of dominance, iterated dominance, dominance-solvability, rationalizability, pure- and mixed-strategy equilibrium, equilibrium in beliefs, trembling-hand and subgame-perfectness, forward induction, and risk- and payoff-dominance from standard references (e.g., Kreps, Game Theory and Economic Modelling or A Course in Microeconomic Theory; Gibbons, Game Theory for Applied Economists or the shorter version in "An Introduction to Applicable Game Theory," Journal of Economic Perspectives 11 (1997), 127-149; Binmore, Fun and Games; or Mas-Colell, Whinston, and Green, Microeconomic Theory)

*+Adam Brandenburger, "Knowledge and Equilibrium in Games," Journal of Economic Perspectives 6 (1992), 83-101 (or Robert Aumann and Adam Brandenburger, "Epistemic Conditions for Nash Equilibrium," Econometrica 63 (1995), 1161-1180)

*+Matthew Rabin, "Incorporating Behavioral Assumptions into Game Theory," 69-87 (chapter 4) in James Friedman, editor, Problems of Coordination in Economic Activity, Kluwer 1994

+Matthew Rabin, "Incorporating Fairness into Game Theory and Economics," American Economic Review 83 (1993), 1281-1302

Robert Aumann, "Backward Induction and Common Knowledge of Rationality," Games and Economic Behavior 8 (1995), 6-19

Elchanen Ben-Porath and Eddie Dekel, "Signaling Future Actions and the Potential for Sacrifice," Journal of Economic Theory 57 (1992), 36-51

John Harsanyi and Reinhard Selten, A General Theory of Equilibrium Selection in Games, MIT 1988

John Harsanyi, "Games with Randomly Disturbed Payoffs: A New Rationale for Mixed-Strategy Equilibrium Points," International Journal of Game Theory 2 (1973), 1-23

Richard McKelvey and Thomas Palfrey, "Quantal Response Equilibria for Normal-Form Games," Games and Economic Behavior 10 (1995), 6-38

Richard McKelvey and Thomas Palfrey, "Quantal Response Equilibria for Extensive-Form Games," manuscript, Caltech, 1994

2. Evidence

*+pp. 215-223 (Sections 3-5.2) of Crawford, "Theory and Experiment . . ."

*+T. Randolph Beard and Richard Beil, "Do People Rely on the Self-interested Maximization of Others? An Experimental Test," Management Science 40 (1994), 252-262

Andrew Schotter, Keith Weigelt, and Charles Wilson, "A Laboratory Investigation of Multiperson Rationality and Presentation Effects," Games and Economic Behavior 6 (1994), 445-468

Russell Cooper, Douglas DeJong, Robert Forsythe, and Thomas Ross, "Alternative Institutions for Resolving Coordination Problems: Experimental Evidence on Forward Induction and Preplay Communication," 129-146 (chapter 7) in Friedman, Problems of Coordination in Economic Activity

*+Rosemarie Nagel, "Unravelling in Guessing Games: An Experimental Study," American Economic Review 85 (1995), 1313-1326

Dale Stahl and Paul Wilson, "On Players' Models of Other Players: Theory and Experimental Evidence," Games and Economic Behavior 10 (1995), 218-254

*+Colin Camerer, Eric Johnson, Talia Rymon, and Sankar Sen, "Cognition and Framing in Sequential Bargaining for Gains and Losses," 27-47 (chapter 1) in Ken Binmore, Alan Kirman, and Piero Tani, editors, Frontiers of Game Theory, MIT 1993

*+Miguel Costa Gomes, Vincent Crawford, and Bruno Broseta, "Experimental Studies of Strategic Sophistication and Cognition in Normal-Form Games," manuscript, UCSD, July 1996

*+Alvin Roth, Vesna Prasnikar, Masahiro Okuno-Fujiwara, and Shmuel Zamir, "Bargaining and Market Behavior in Jerusalem, Ljubljana, Pittsburgh, and Tokyo: An Experimental Study," American Economic Review 81 (1991), 1068-1095

+Alvin Roth, "Introduction to Experimental Economics" and "Bargaining Experiments," chapters 1 and 4 of Kagel and Roth, Handbook of Experimental Economics

+Colin Camerer and Richard Thaler, "Ultimatums, Dictators, and Manners," Journal of Economic Perspectives 9 (1995), 209-219

Colin Camerer, "Progress in Behavioral Game Theory," Journal of Economic Perspectives, in press

Richard McKelvey and Thomas Palfrey, "An Experimental Study of the Centipede Game," Econometrica 60 (1992), 803-836

Drew Fudenberg and David Levine, "Measuring Players' Losses in Experimental Games," Quarterly Journal of Economics 112 (1997), 507-536

+Vincent Crawford, "A Survey of Experiments on Communication via Cheap Talk," Journal of Economic Theory, in press

B. Unstructured or unobservably structured interactions and cooperative game theory

1. Theory

a. General

*+pp. 10-11 (section 1.3) of Alvin Roth and Marilda Sotomayor, Two-Sided Matching: A Study in Game-Theoretic Modeling and Analysis, Cambridge 1990

*+Adam Brandenburger and Harborne Stuart, Jr., "Biform Games," Harvard Business School Working Paper 95-035, April 1995

b. Bargaining

*+pp. 273-278 of Crawford, "Thomas Schelling . . ."

John Nash, "Two-Person Cooperative Games," Econometrica 21 (1953), 128-140

+Alvin Roth, Axiomatic Models of Bargaining, Springer-Verlag 1979

c. The core

pp. 1-77, 187-221 (chapters 1-3, 7-8) of Roth and Sotomayor, Two-Sided Matching (can substitute: +David Gale and Lloyd Shapley, "College Admissions and the Stability of Marriage," American Mathematical Monthly 69 (1962), 9-15; and +Lloyd Shapley and Martin Shubik, "The Assignment Game I. The Core," International Journal of Game Theory 1 (1972), 111-130)

2. Evidence

a. Bargaining

*+pp. 223-227 (section 5.3) of Crawford, "Theory and Experiment . . ."

*+Alvin Roth, "Bargaining Phenomena and Bargaining Theory," 14-41 (chapter 2) in Alvin Roth, editor, Laboratory Experimentation in Economics: Six Points of View, Cambridge 1987

+Alvin Roth, "Toward a Focal-Point Theory of Bargaining," 259-268 (chapter 12) in Alvin Roth, editor, Game-Theoretic Models of Bargaining, Cambridge 1985

Alvin Roth and Francoise Schoumaker, "Expectations and Reputations in Bargaining: An Experimental Study," American Economic Review (1983), 362-372

Chapters +2 and 3-5 and appendix C of Schelling, The Strategy of Conflict

b. The core and hybrid notions

*pp. 123-170 (chapter 5) of Roth and Sotomayor, Two-Sided Matching (can substitute: +Alvin Roth, "The Evolution of the Labor Market for Medical Interns and Residents: A Case Study in Game Theory," Journal of Political Economy 92 (1984), 991-1016; and Alvin Roth, "A Natural Experiment in the Organization of Entry-Level Labor Markets: Regional Markets for New Physicians and Surgeons in the United Kingdom," American Economic Review 81 (1991), 415-440)

*+Alvin Roth and Xiaolin Xing, "Jumping the Gun: Imperfections and Institutions Related to the Timing of Market Transactions," American Economic Review 84 (1994), 992-1044

II. Dynamic Approaches

A. Theory

1. Deterministic evolutionary dynamics

*+Thomas Schelling, "Hockey Helmets, Concealed Weapons, and Daylight Saving: A Study of Binary Choices with Externalities," 211-243 (chapter 7) in his Micromotives and Macrobehavior, Norton 1978 (longer version in Journal of Conflict Resolution 17 (1973), 381-428)

Thomas Schelling, "Sorting and Mixing: Race and Sex," 135-166 (chapter 4) in his Micromotives and Macrobehavior (longer version appeared as "Dynamic Models of Segregation," Journal of Mathematical Sociology 1 (1971), 143-186)

*+pp. 34-49 of Vincent Crawford, "An 'Evolutionary' Interpretation of Van Huyck, Battalio, and Beil's Experimental Results on Coordination," Games and Economic Behavior 3 (1991), 25-59

*+pp. 537-542 (sections 1-2) of Vincent Crawford, "Learning and Mixed-Strategy Equilibria in Evolutionary Games," Journal of Theoretical Biology 140 (23 October 1989), 537-550

*+pp. 243-261 of Michihiro Kandori, "Evolutionary Game Theory in Economics," 243-277 (chapter 8) in Kreps and Wallis, Advances in Economics and Econometrics: Theory and Applications, Seventh World Congress, Vol. I

*+pp. 213-220 of Larry Samuelson, "Does Evolution Eliminate Dominated Strategies?," 213-235 (chapter 11) in Binmore, Kirman, and Tani, Frontiers of Game Theory

2. Long-run equilibria of ergodic evolutionary dynamics

*+pp. 261-277 of Kandori, "Evolutionary Game Theory in Economics"

Michihiro Kandori, George Mailath, and Raphael Rob, "Learning, Mutation, and Long Run Equilibria in Games," Econometrica 61 (1993), 29-56

+H. Peyton Young, "The Evolution of Conventions," Econometrica 61 (1993), 57-84

Glenn Ellison, "Learning, Local Interaction, and Coordination," Econometrica 61 (1993), 1047-1071

+Lawrence Blume, "Population Games," Santa Fe Institute Working Paper 96-04-022, December 1995, to appear in W. Brian Arthur, David Lane, and Steven N. Durlauf, editors, The Economy as an Evolving, Complex System II, Santa Fe Institute

3. Adaptive learning models

+Robert E. Lucas, Jr., "Adaptive Behavior and Economic Theory," Journal of Business 59 (October 1986), S401-S426; reprinted in Robin M. Hogarth and Melvin W. Reder, editors, Rational Choice, University of Chicago Press, 1987

*+pp. 542-550 (sections 3-5) of Crawford, "Learning and Mixed-Strategy Equilibria in Evolutionary Games"

*Drew Fudenberg and David Kreps, "Learning Mixed Equilibria," Games and Economic Behavior 5 (1993), 320-367

Drew Fudenberg and David Kreps, "Learning in Extensive-Form Games. I. Self-Confirming Equilibria," Games and Economic Behavior 8 (1995), 20-55

Paul Milgrom and John Roberts, "Adaptive and Sophisticated Learning in Normal Form Games," Games and Economic Behavior 3 (1991), 82-100

Drew Fudenberg and David Levine, Theory of Learning in Games, MIT in press (this can be downloaded from David Levine's web site, http://levine.sscnet.ucla.edu)

B. Evidence

*+pp. 227-235 (section 6) of Crawford, "Theory and Experiment"

*+Daniel Friedman, "Equilibrium in Evolutionary Games: Some Experimental Results," Economic Journal 106 (1996), 1-25

+John Van Huyck, Joseph Cook, and Raymond Battalio, "Selection Dynamics, Asymptotic Stability, and Adaptive Behavior," Journal of Political Economy 102 (1994), 975-1005

+John Van Huyck, Joseph Cook, and Raymond Battalio, "Adaptive Behavior and Coordination Failure," Journal of Economic Behavior and Organization, in press

+John Van Huyck, Raymond Battalio, and Frederick Rankin, "Selection Dynamics and Adaptive Behavior without Much Information," manuscript, Texas A&M University, September 1996

+John Van Huyck, Raymond Battalio, Sondip Mathur, Andreas Ortmann, and Patsy Van Huyck, "On the Origin of Convention: Evidence from Symmetric Bargaining Games," International Journal of Game Theory 24 (1995), 187-212

*+John Van Huyck, Raymond Battalio, and Frederick Rankin, "On the Origin of Convention: Evidence from Coordination Games," Economic Journal 107 (1997), 576-597

+Dale Stahl, "Boundedly Rational Rule Learning in a Guessing Game," Games and Economic Behavior 16 (1996), 303-330

+John Van Huyck, John Wildenthal, and Raymond Battalio, "Tacit Cooperation, Strategic Uncertainty, and Coordination Failure: Evidence from Repeated Dominance Solvable Games," Research Report No. 1, Texas A&M University Economics Laboratory, June 1995

Teck Hua Ho, Keith Weigelt, and Colin Camerer, "Iterated Dominance and Iterated Best-Response in Experimental 'P-Beauty Contests'," American Economic Review, in press

Teck Hua Ho and Keith Weigelt, "Task Complexity, Equilibrium Selection, and Learning: An Experimental Study," Management Science 42 (1996), 659-679

*+Vincent Crawford, "Learning Dynamics, Lock-in, and Equilibrium Selection in Experimental Coordination Games," UCSD Discussion Paper 97-19, 1997

Vincent Crawford, "Adaptive Dynamics in Coordination Games," Econometrica 63 (1995), 103-143

+John Van Huyck, Raymond Battalio, and Richard Beil, "Tacit Coordination Games, Strategic Uncertainty, and Coordination Failure," American Economic Review 80 (1990), 234-248

+John Van Huyck, Raymond Battalio, and Richard Beil, "Strategic Uncertainty, Equilibrium Selection, and Coordination Failure in Average Opinion Games," Quarterly Journal of Economics 106 (1991), 885-910

+Marc Knez and Colin Camerer, "Creating Expectational Assets in the Laboratory: Coordination in 'Weakest-Link' Games," Strategic Management Journal 15 (1994), 101-119

+John Van Huyck, Raymond Battalio, and Frederick Rankin, "Evidence on Learning in Coordination Games," Research Report 7, Texas A&M University Economics Laboratory, 1995

*+Colin Camerer and Teck Hua Ho, "Experience-weighted Attraction Learning in Games: A Unifying Approach," manuscript, Caltech, December 1996

+John Van Huyck, Raymond Battalio, and Richard Beil, "Asset Markets as an Equilibrium Selection Mechanism: Coordination Failure, Game Form Auctions, and Tacit Communication," Games and Economic Behavior 5 (1993), 485-504

Gerard Cachon and Colin Camerer, "Loss Avoidance and Forward Induction in Experimental Coordination Games," Quarterly Journal of Economics 111 (1996), 165-194

*+Vincent Crawford and Bruno Broseta, "What Price Coordination? The Efficiency-Enhancing Effect of Auctioning the Right to Play," UCSD Discussion Paper 95-41R, 1997, American Economic Review, in press

Dilip Mookherjee and Barry Sopher, "Learning Behavior in an Experimental Matching Pennies Game," Games and Economic Behavior 7 (1994), 62-91

Dilip Mookherjee and Barry Sopher, "Learning and Decision Costs in Experimental Constant Sum Games," Games and Economic Behavior 19 (1997), 97-132

*+Ido Erev and Alvin Roth, "Modeling How People Play Games: Reinforcement Learning in Experimental Games with Unique, Mixed Strategy Equilibria," American Economic Review, in press (revised version of +"On the Need for Low Rationality, Cognitive Game Theory: Reinforcement Learning in Experimental Games with Unique, Mixed Strategy Equilibria")

Jason Shachat, "Mixed Strategy Play and the Minimax Hypothesis, UCSD Discussion Paper 96-37, November 1996

James Cox, Jason Shachat, and Mark Walker, "An Experimental Test of Bayesian vs. Adaptive Learning in Normal Form Games," manuscript, UCSD, revised September 1997

James Andreoni and John Miller, "Auctions with Artificial Adaptive Agents," Games and Economic Behavior 10 (1995), 39-64

*+Alvin Roth and Ido Erev, "Learning in Extensive-Form Games: Experimental Data and Simple Dynamic Models in the Intermediate Term," Games and Economic Behavior 8 (1995), 164-212

Vincent Crawford/ UCSD Department of Economics / last modified 6 December 2003 

The support of the U.S. National Science Foundation in preparing research materials on this site is gratefully acknowledged.
Copyright © Vincent P. Crawford, 2003. All federal and state copyrights reserved for all original material on this site.