Economics 431/531: Games and Decisions

Spring 2007 Syllabus

Contact Information

Class meetings

131 McClelland Hall
Mondays and Wednesdays, 9:30-10:45am

Optional review session: 132 McClelland Hall
Fridays, 9:30-10:45am


David Reiley
Office hours: Tuesdays 2:00-3:15pm, or by appointment
401cc McClelland Hall


Matthew Moore
Office hours: Nights before problem sets due, 9:30-11:30pm. To find him in the ILC, call his cell phone: 520-850-6951.

Blake Rebling
Office hours: W 8:00-9:30am
401b McClelland Hall

Andrew Sherman

Course resource page

Course Description

This course will introduce you to the topic of game theory, or the analysis of strategic decision making. Strategic games are important in a variety of economic contexts, such as price competition, product design, firm entry into a new market, tax policy, bargaining, and bidding in auctions. In this course, we will develop a general framework for analyzing how to make optimal strategic decisions, and for predicting what will happen in any given strategic economic environment. As we develop the mathematical framework in class, we will apply it to various economic decision problems, as well as to examples in other areas, from parlor games to professional sports to local and global politics. In order to better illustrate the concepts of the course, we will often play games with each other in class, often for cash payoffs.

My goals are for each student in this course to:

This course has intermediate microeconomics as a prerequisite, mainly because I will assume familiarity with concepts of optimization. Students should be comfortable with the concepts of differential and integral calculus in order to understand the course fully, although 90% of the assignments in the course will require mathematics no more advanced than the algebraic solution of a system of two equations in two unknowns.

The overall outline of the topics in the course is the same as the outline of the textbook:

  1. Introduction
    1. What is a game?
    2. How do we think about them?
  2. Concepts and Techniques
    1. Games with Sequential Moves
    2. Games with Simultaneous Moves
    3. Combining Simultaneous and Sequential Moves
    4. Mixed Strategies
  3. Advanced Techniques: Some Broad Classes of Games and Strategies
    1. Uncertainty and Information
    2. Games with Strategic Moves: Changing the Rules
    3. The Prisoners' Dilemma: Repeated Games
    4. Collective-Action Games
    5. Evolutionary Games
  4. Applications
    1. Brinkmanship
    2. Voting
    3. Bidding and Auctions
    4. Bargaining
    5. Markets and Competition

Teaching Philosophy

I want to make this course interesting and thought-provoking, and one from which you will remember some important lessons even after the final exam is over.

I plan to reserve our class time (a precious resource) for two-way communication: questions, discussions, and cooperative problem-solving. Most of the one-way communication in this course will happen through assigned readings. In order for the interactive class format to work, you should do two things: (1) Make sure to complete each day's assigned reading before coming to class, so that we can discuss it and you can ask questions about anything you didn't understand. When doing the readings, try a few problems out of the book to check your understanding. (2) Be ready to think and talk when you come to class. In order to make sure that everyone has the chance to participate in class, I will call on each student from time to time.

Whenever you don't understand something, either from the readings or from class, please ask a question. Often other students are having the same difficulty as you are and all can benefit from the exchange. I need your feedback so that I can make the course meet your needs. Furthermore, if you're scared of the idea that I might cold-call you during class, a great defensive move is to come prepared to ask me something, so that I know you're actively participating.

I believe that the deepest learning occurs when students teach themselves. Therefore, I expect you to do most of your learning through the readings and assignments, both on your own and in cooperation with your classmates. I do not intend to "cover" everything in class lectures. Rather, my job in this course is to guide the learning by choosing readings and exercises for you, and to coach you through this learning process in a way that maximizes understanding with as little frustration as possible.

For example, when you get stuck on a page of reading you don't understand; don't waste many hours on it, but instead note that you want to ask me about it in class or via an email message. Similarly, when you get stuck on a math problem you can't solve, I can give you a hint. The book can't interact with you, but I can, and that's what I'm here for. You may also find it valuable to ask questions of each other when studying.

I have high expectations of my students. I think you will find that by responding to my challenges, you will learn quite a lot in this course, and have a good time doing so. Please expect to spend about six to ten hours per week doing readings and assignments. If you find yourself having to spend more than ten hours a week on this course outside of class, please let me know so that I can do something to make the workload more reasonable.

Some students benefit more from my teaching style than others. If you know you prefer a traditional, lecture-based course, you might wish to consider taking a different course, or taking this course in a future semester when it may be taught by a different instructor.

Course Materials


Reading assignments will come mainly from the required text: Games of Strategy, second edition, by Avinash Dixit and Susan Skeath. I may occasionally supplement the text with newspaper articles or academic journal articles.

Laboratory Fee

In addition to purchasing the text for the course, I also require you to pay a "laboratory fee" of $30 to me, so that I will have a pool of money to use as financial incentives in the games you will pay in class during the semester. Using real money makes these "classroom experiments" a stronger learning experience. Some of you will likely earn back more than $30 over the course of the semester, while others will earn back less. (When I have played in such classroom games personally, I usually have earned less money than the average player. The consolation is that when I lose money, it is usually a very valuable and memorable learning experience.)

I do not take formal attendance in class, as I believe students are capable of making their own decisions about whether attending class is more important than alternatives in their lives. However, your ability to earn money from classroom games will depend on your attendance; you cannot earn money if you're not present.

The laboratory fee of $30 should be paid to me no later than the third day of class. Students who are late with their payments risk a penalty to their homework grade.

Use of the Internet

I will be using Desire2Learn to organize some materials for the course. You will use Desire to take online quizzes, and to check your grades for the course. If you have any trouble using Desire2Learn, please ask for help by emailing or visiting the Office of Student Computing Resources. Please inform the instructor or the preceptors if this does not resolve your problem.

I also maintain a list of email addresses of all of the students in my class. I use this list to make occasional announcements and clarifications. For example, I may discover an article on a World Wide Web site that I wish to share with you, and I will email everyone the location so that they have a chance to read it. Also, when a student asks me a question via email and I feel the answer would be of general interest to everyone in the class, I may send out my answer to everyone so that all may benefit from the question. I feel that such techniques save time and energy for all concerned.

I have used the University registration system to create an email list for this class. If you find you are not receiving my emails, please let me know. If you prefer to use a different email address (such as AOL), I recommend that you set up forwarding from your University address to your preferred address. Visit this link to log in to Webmail for this purpose.

In any emails addressed to me, please put "Econ 431" in the subject line, so that the message will come to my attention promptly. You should try to check your email regularly during the semester, at least twice a week, in order to make sure you receive the full benefit of the messages I send.


Your final grade will depend on four different elements: a series of online quizzes (10% total), a series of problem sets (25% total), two midterm exams (20% each), and a cumulative final exam (25%).

I do not grade on a curve, but use a fixed grading scale: A>90, B>80, C>70, D>60, E<60. This means that good grades in my course are challenging to achieve, but I am happy to reward everyone who shows achievement.

Students registered for Econ 531 will be required to complete a research paper, due at the end of the semester, in addition to the Econ 431 course requirements. Please see me as early as possible in the semester to begin talking about the scope of the projects, and possible topics.

Good, thoughtful class participation may also boost your final grade. I do not have a mandatory attendance policy (except for exams - see below!), and I will not take formal attendance. Missing classes will exclude you from the opportunity to earn money in classroom games, from the opportunity to learn from your professor and classmates, and from the opportunity to demonstrate to me the quality of your participation. I expect you to be able to judge for yourself whether these opportunity costs are large enough that you want to come to class on a given day. You do not owe me an explanation if you are absent from a particular class.

Online Quizzes

Starting with the second day of class, each day when there is a new assigned reading marked in the syllabus, you will be asked to take an online quiz. You will use Desire2Learn to take these quizzes, which will be short and contain relatively easy questions, designed merely to give you an incentive to do each day's reading on time. You may take the quizzes at your own pace, and you may use the textbook to take them, but I expect each student to take the quizzes independently. There will be approximately twenty-five quizzes this semester; I will drop your lowest five quiz scores.

Problem Sets

You will be expected to turn in a series of problem sets, approximately one problem set every two weeks. I plan to hand each one out at least a week in advance. The problem sets are designed to help you learn the material that will be tested on exams; they will involve some calculations as well as some short essays. You should feel free to discuss the problems and check answers with your classmates, as I believe that such out-of-class discussions can enhance your learning experience. However, I do expect each student to prepare his or her own writeup independently, to demonstrate independent understanding of the problems. Merely copying someone else's written work constitutes academic dishonesty, and will be punished accordingly.

I have prepared some guidelines for preparing your problem sets. Please follow these guidelines in order to make it easier for the preceptors to award you full credit when grading.

A late problem set will receive a score of zero. Thus, in terms of grading, you will be better off turning in an incomplete assignment than trying to complete it late.


The exam schedule divides the course roughly into thirds. However, knowledge in this course is somewhat cumulative, so please do not allow yourself to forget everything you learned in one section of the course before we move on to the next section. The final exam will be explicitly cumulative, with emphasis on the material from the last third of the course.

No make-up exams will be given; if you miss an exam, you will receive a zero. Make-ups will be given only in cases of dire personal emergency: death, emergency heart transplants, jail terms, etc., or in cases of conflict with a mandatory University activity (such as competing in an athletic match with a varsity team). Supersaver airfares, fraternity parties, and intramural athletics do not fall into this category. Please re-read this paragraph. Make your travel arrangements accordingly.

Students with disabilities who wish to request special accommodations are encouraged to contact me as far in advance of their exams as possible.

Academic Dishonesty and Academic Misconduct

Academic dishonesty occurs with any action or attempted action designed to create an unfair academic advantage or disadvantage for any member(s) of the academic community. Various forms of academic dishonesty include, but are not limited to cheating, fabrication, facilitating academic dishonesty, and/or plagiarism. All forms of academic dishonesty are subject to sanctions under the Code of Academic Integrity, which may include: written warning, reduction in grade for work involved, disciplinary probation, loss of credit for work involved, failing grade in the course, suspension, and/or expulsion.

Academic misconduct is defined as any behavior not conforming to prevailing standards or rules within the academic community. Various forms of academic misconduct include (but are not limited to) disruptive behavior, threatening behavior, and/or the theft or damage of University property. All forms of academic misconduct are subject to sanctions under the Code of Conduct, which may include: classroom conduct, interim action, program/support, organizational sanctions, restricted access to university property, administrative hold, warning, probation, suspension, and/or expulsion.

For more specific examples of academic dishonesty, academic misconduct, and how to avoid such behaviors, please visit the Academic Integrity Student Resource Guide.

Students who plagiarize on a paper in my course can expect to receive a severe penalty. The exact penalty may depend on circumstances, but my standard penalty has been a failing grade for the course (even on a first offense). 

While I encourage students to work together on problem sets, I do expect independent writeups of this work. Evidence of outright copying will be treated as plagiarism, with a minimum penalty of a zero grade on the assignment; particularly egregious offenses will result in a failing grade for the course.


This schedule is subject to change. Any changes will be announced in advance.




Assignment due

10 Jan

Examples of Games

Ch 1

15 Jan NO CLASS - MLK Day    
17 Jan

Thinking About Strategy

Ch 2

22 Jan

Sequential Moves

Ch 3

PS #1, lab fee

24 Jan

Simultaneous Moves

Sec 4.1-4.5

29 Jan

Multiple Players, Multiple Equilibria, No Equilibria

Sec 4.6-4.8

31 Jan

Continuous Strategies,

Sec 5.1, 5.3C, 5.4

PS #2

5 Feb

The Validity of Nash Equilibrium

Sec 5.2, 5.3A-B


7 Feb

Extensive and Strategic Forms

Ch 6  
12 Feb


  PS #3
14 Feb

Midterm Exam #1


19 Feb

Mixed Strategies

Sec 7.1-7.3, Appendix 1 to Ch 7

21 Feb

Mixing with More than Two Strategies

Sec 7.4-7.7

26 Feb

Mixed Strategies in Non-Zero-Sum and in Two-Stage Games

Ch 8 (skip Section 8.5), plus Handout on simplified football

28 Feb

Uncertainty and Information

Sec 9.1-9.4

PS #4

5 Mar

Signaling Games

Sec 9.5-9.6, Appendix 1 to Ch 9

7 Mar Strategic Moves: Changing the Rules

Ch 10

PS #5

19 Mar The Prisoners' Dilemma Sec 11.1-11.4  
21 Mar More PD: Evidence and Applications Sec 11.5-11.6  
26 Mar

Collective-Action Games

Sec 12.1-12.4

PS #6
28 Mar Midterm Exam #2    
2 Apr


Sec 12.5-12.6  
4 Apr

Evolutionary Games

Sec 13.1-13.4

PS #7
9 Apr

More on Evolution of Strategies

Sec 13.5-13.9

11 Apr Brinkmanship Ch 14  
16 Apr Voting Ch 15  
18 Apr

Bidding in Auctions

Sec 16.1-16.5

PS #8
23 Apr

Testing Auction Theory,
Auction Design

Lucking-Reiley, "Magic on the Internet",
Sec 16.6-16.9
25 Apr More on Auctions  


30 Apr


Ch 17

2 May


Ch 18

PS #9


11 May

Final Exam,