Lahore University of Management Sciences

ECON 233 Introduction to Game Theory

Spring 2017
Instructor Husnain Fateh Ahmad
Room No.
Office Hours Tuesday and Thursday 3-4pm , or by appointment
Email husnain.fateh@lums.edu.pk
Secretary/TA TBD
TA Office Hours TBD
Instructor past evaluations http://hfahmad.weebly.com/teaching

Course Basics
Credit Hours 4
Lecture(s) Nbr of Lec(s) Per Week 2 Duration 110mins
Recitation/Lab (per week) Nbr of Lec(s) Per Week - Duration -
Tutorial (per week) Nbr of Lec(s) Per Week As needed Duration -

Course Distribution
Core -
Elective All
Open for Student Category All
Close for Student Category none

Course Description

Game Theory forms the foundation of modern microeconomics. As such then, it is of utmost importance for all students of economics
to be well versed in the subject, otherwise any training in field, is at best, perfunctory.

This course introduces students to the field of Game Theory. It focusses on the assumptions made for the study of human behaviour in
economics and seeks to equip students with the basic mathematical tools for modelling and solving everyday strategic interactions
(games). Special focus is given to applications pertaining to business decisions and industrial organisation.
Other than economics, game theory has wide ranging applications in fields including law, political science, mathematics, finance and
computer science.

Course Prerequisites

Principles of Microeconomics AND statistics and Data Analysis

The course assumes familiarity with calculus and basic optimisation techniques.

Grading Breakup and Policy

Quizzes/Assignments (announced) 40%

Midterm 30%
Final 30%

Course Outline
Module Topics Recommended Readings
Introduction and Foundations: Since we do not follow the text in a linear fashion, it is recommended
that you read the text after we have discussed a topic in class. The
1 Extensive form games chapters are listed below in the loose order we will follow them.
Normal form games
Backwards induction. Ch 1, 2, 14, 3, 6, 7, 9, 15, 4
 Lahore University of Management Sciences
Dominance and IESDS
Nash Equilibrium (Pure and
Mixed)
Subgame Perfection

Information Economics:
Ch 24, 26, 28
Random chance and nature.
Private information.
2
Bayesian Nash Equilibrium.
Perfect Bayesian Nash
Equilibrium (optional).

Applications:
Ch 10, 27, 19 and class notes.
Oligopoly models: Cournot,
Stackelberg and Bertrand
Oligopolies (with heterogeneous
3
firms).
Auctions: First and Second Price
Auctions.
Signalling.

Textbook(s)/Supplementary Readings

Recommended Text:
Watson,Joel (2013). Strategy - An Introduction to Game Theory, Third Edition.

Additional References:
1) Kevin Leyton-Brown and Yoav Shoham (2008), Essentials of Game Theory. Morgan & Claypool Publishers.
2) Dutta, Prajit K. (1999) Strategies and Games: Theory and Practice. The MIT Press: Cambridge, Massachusetts.
3) Osborne, Martin J. 2004. An Introduction to Game Theory. Oxford University Press.
4) Games of Strategy, Dixit, Skeath & Riley, Third (any) Edition.

Course Policies
The following policies will be adhered to strictly.

Quizzes: There will be six (6) quizzes in the course. The purpose of the quiz is to prepare students for the midterm and final. They
will take place roughly every two weeks.

Missed Quiz Policy: If you miss a quiz you must submit a missed quiz petition to the instructor within 3 days of the missed quiz. You
must attach valid proof for the cause of missing a quiz. The policy for missing a quiz is identical to the OSA policy for missing an
exam, expect that the petition is submitted to the instructor.

Exams: There will be a midterm and a final. The exams will be roughly equally spaced. The date of in class exams will be announced
a week in advance. The date of the final will be set by the Registrar's office.

Missed Exam Policy: If you miss an exam (mid-term or final), you must submit a petition to the OSA. Please consult the OSA policy
for further details.

Attendance and Tardiness: Attendance is not mandatory; you are however academically responsible for all material covered in
class.
 Lahore University of Management Sciences
Tardiness is simply rude. You will not be allowed to enter class after it has started.

Laptops and mobile devices: Use of electronic devices such as smart phones, tablets and laptops is not allowed.

Cheating: Cheating and plagiarism will not be tolerated. Attempts to cheat in any way, shape, or form will result in an F for the
course and will be reported to the Disciplinary Committee. Its not worth it, so dont do it.

Classroom Behaviour: Students must read, understand and conduct themselves in a manner consistent with the expected classroom
behaviour guidelines below.

1
Expected Classroom Behaviour
While the University experience is one which values academic freedom and liberty, it cannot reach its goals of facilitating learning if
some structure does not exist. To that end, then, please review the following list of appropriate behaviours and act accordingly.

Students are expected to be on time, find a seat, and be prepared to engage in the work of the class (e.g., taking notes,
participating in Socratic questioning or group activities, etc.).

o You will not be allowed to enter the class after it has started.

Practice common courtesy.

o Remember that in university, as in every other area of life, politeness and respect count.

o Do not have private conversations with your neighbours during class.

o Respect all opinions. Others may have different ideas and opinions, they many ask questions that you perceive to
be stupid, but they deserve the same level of respect from you as you wish from them

Students are expected to use good manners, be courteous and act with decorum toward their peers and anyone who may be
in class facilitating the learning process.

Students are encouraged to ask questions at any time. Students are expected to raise their hands in order to participate in
discussion or in raising questions.

Work is expected on the date it is due. Exceptions are made only for extraordinary situations and with the approval of the
professor.

Students are expected to turn off cell phones, laptops, tablets and other electronic devices during class.

Sleeping in class is not acceptable: Sleeping in class is disrespectful. If youre tired you might as well stay home and get the
sleep. Class attendance is not mandatory, so if you will not learn anything, do the rational thing and stay home.

Avoid stupid questions, for example:

o I missed class did you do anything important.

1
Sections copied and adapted from multiple sources:
-Expectations Regarding Behavior in the Classroom, USCS College of Arts and Sciences, Revised October 2001.
https://faculty.uscupstate.edu/mulmer/CAS%20Behavior.html
-HCCs Ybor City Campus Classroom Etiquette and Proper Student Behavior.
https://www.hccfl.edu/media/26084/campus_etiquette_notes2.pdf
-Weber State University, Sharon Dover, --Academic Advisement Center, http//department.weber.edu/fye/etiquette.asp
-Palm Beach Community College, wwwpbcc.edu/studentsuccess/behavior.asp
-Bellevue Community College, http://scidiv.bcc.ctc.edu/LS/Teaching/Class Etiquette
 Lahore University of Management Sciences
o After chatting with your friend for five minutes, Could you repeat that?

o In the middle of a fascinating discussion on a new concept: Will this be on the test?

o At the end of the semester after missing numerous assignments: Is there extra-credit in this class?

o For most administrative questions, note that the answer is almost always in the syllabus.

Special concern: Emails

Emails have always been a confusing form of communication. In the beginning they were considered to be an extension of regular
mail (snail mail) and so were written formally. Now with the advent of texting and the integration of email in smartphones, there is a
tendency to write emails as if they were SMS messages, complete with text speak and lols. This is wrong, resist this temptation.
An improper email is a sign of disrespect. A university is a professional setting and when communicating in any professional setting,
emails are a means of formal communication.

I have in the past advised students to go back to their grade 5 notebooks and read up on how formal letters are written. I have since
then lost faith in their ability to conduct independent research, therefore I am providing a template (just copy paste it and edit as
needed).
Dear Sir:

<Optional: Asalam-o-Alaekum>2

I am a student in your ECON ### - <COURSE TITLE> class. I was wondering <INSERT QUESTION>.

Thanking you in advance,

<Student name>

Email Template

Email is admittedly tricky. Here I list some dos and donts.

DO copy paste the above and fill it out.

DO spellcheck. Read your email 5 times before sending it. You do not want me to think you lack the ability to write a basic email,
after all, I may be recommending you for a job/future studies, and it is my duty to be truthful. Bad communication skills do not
a strong recommendation make.

DO pay attention to the subject of the email. If you are replying to an email I sent, then you can ignore this, otherwise this is also part
of the email. Be polite and brief. A good rule of thumb is <Course Title>:<Query>, e.g Int. Micro: Request for meeting.

DONT sign off with anything other than your full name. I do not need to know what major and which degree you are reading for.
The designation under your name is typically, as the name implies, for your designation. Student is sadly not a relevant
designation.

Sometimes people replace it with an achievement that is impressive or requires effort (though most people who are not
Nobel Laureates leave it blank). The fact that you are an ACF (Econ, SS, etc) major is not impressive. In fact as the
sociologist/philosopher Umair Javed noted; if your greatest achievement is that you got into a particular major in
undergrad, its better you do not broadcast it to the world.

2
This is optional. However, if you are going to say salam, say it properly. No AoA, etc. Again, do not use shorthand.
 Lahore University of Management Sciences
DONT be overly polite, it comes across as rude and sarcastic. In a formal setting, one must be brief and to the point. E.g do not say,
If you could please find it in your heart to have the time to look into my humble request.. Again, just copy paste the above
email. Brevity is a virtue.

Subject: Game Theory: Appointment

Dear Sir:

I am a student in your ECON 262 Introduction to Game Theory class. I was unable to come to office hours
because I have another class at that time. Can I see you at some other time this week?

Thanking you in advance,

Jane Doe

Example email: Correct subject and content.

Email Response Policy

I will only respond to emails that:
Follow the above template.

Ask a question not already answered in the syllabus.

Ask a question that was not already answered in a previous email.

Ask administrative questions that I have not stated in class on multiple occasions.

Questions about course content are always welcome.

Examples of what not to do

I now provide some examples of emails that do not pass muster. I wish they were fictional, but they are real. As an exercise please
list the reasons why they are incorrect. There can of course be multiple reasons.

Subject: Quizzes Upload! Subject: Game theory

Hello sir. What are your office hours for tomorrow?

If it is possible for you, then will you please upload the
mini quizzes and 2 big quizzes. (sic) It will really help
us in preparing for the finals. Thank you sir!

Regards,
XYZ
Example 1: So close, yet so far. Example 2: SMS
 Lahore University of Management Sciences
Subject: Game Theory Subject: RE: GT and MathApp: Quiz 2 Date

AOA, Sir, do we have an assignment for Tuesday?

Quick question: for symmetric firms under the Regards

Bertrand model, should we solve via best response
functions or apply the guess and verify rule that price John Doe
will equal cost? <Roll #>
BSc Accounting and Finance
Confused Lahore University of Management Sciences
_______________________________
From: Husnain Fateh
Sent: 20 November 2014 12:42 PM
Subject: GT and MathApp: Quiz 2 Date

Dear All:

This is to confirm that the quiz has been moved by a

week. So Quiz 2 will now be on the 4th of
December.

This also means that there is no assignment this

week for the game theory class.

Enjoy your weekend! (MathApp class: start

enjoying it after todays class.)

Best,

Husnain Fateh Ahmad, PhD

Assistant Professor of Economics
Lahore University of Management Sciences

Example 3: Letter to Agony Aunt Example 4: Comprehension Skills!