Strategy: An Introduction to Game Theory

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Key Features NEW—Chapter on General Assumptions and Methodology : This added chapter provides an overview of how mathematical models can be used to predict how people will behave in strategic situations. NEW—Guided Exercises : Game theory is best mastered by problem solving, and Strategy, Second Edition, has numerous end-of-chapter exercises. A "guided exercise" has been added to each chapter to help students understand how to approach and work through problems. NEW—Topics for Political Economists and Political Scientists : The Second Edition includes new sections on the median voter theorem and candidates’ equilibrium policy locations, strategic voting, multilateral bargaining in legislatures over proposals and amendments to new laws, and information aggregation and jury deliberations. More on Contracting and Contract Enforcement : A wide range of interesting strategic behavior relates to the formation and enforcement of contracts, and Strategy, Second Edition, includes expanded coverage of the hold-up problem, unverifiable investments, up-front contracting, and option contracts. About The Author Joel Watson is professor of economics at the University of California, San Diego. He received his B.A. from the University of California, San Diego, and his Ph. D. from Stanford University. Watson’s work has been published in a variety of leading journals, including American Economic Review, Econometrica, Journal of Economic Theory, Quarterly Journal of Economics, and Games and Economic Behavior. Table of Contents Preface Introduction : Noncooperative Game Theory PART I : Representations and Basic Assumptions Strategy and the Normal Form : Terminology and Notation for Strategies Beliefs, Mixed Strategies, and Expected Payoffs : Guided Exercise Exercises General Assumptions and Methodology : Rationality Part II : Analysing Behaviour in Static Settings Dominance and Best Response: Dominance Rationalizability and Iterated Dominance : The Second Strategic Tension Location and Partnership: A Location Game Nash Equilibrium : Congruous Sets Oligopoly, Tariffs,Crime, and Voting: Cournot Duopoly Model Mixed -Strategy Nash Equilibrium: Guided Exercise Strictly Competitive Games and Security strategies: Guided Exercise Contract, Law and Enforcement in Stratic Settings : Complete Contracting in Discretionary Environments Part III : Analyzing Behaviour in Dynamic Settings Details of the Extensive Form Backward Introduction and Subgame Perfection: Sequential Rationality and Backward Induction Topics in Industrial Organization: Advertising and Competition Parlor Games : Guided Exercise Bargaining Problems: Bargaining: Value Creation and Division Two-Period, Alternating-Offer Games: Power to the Patient Games with Joint Decisions; Negotiation Equilibrium: Joint Decisions Unverifiable Investment, Hold Up, Options, and Ownership: Hold-Up Example Repeated Games and Reputation : A Two-Period Repeated Game Collusion, Trade Agreements, and Goodwill: Dynamic Oligopoly and Collusion Part IV : Information Random Events and Incomplete Information : Guided Exercise Risk and Incentives in Contracting: Risk Aversion Bayesian Nash Equilibrium and Rationalizability: Guided Exercise Lemons, Auctions, and Information Aggregation : Markets and Lemons Perfect Bayesian Equilibrium: Conditional Beliefs about Types Job-Market Signaling and Reputation: Jobs and School Appendices: Review of Mathematics The Mathematics of Rationalizability and Existence of Nash Equilibrium : Dominance, Best Responses and Correlated Conjectures