Game Theory

Using fascinating examples from a range of disciplines, this textbook provides social science, philosophy and economics students with an engaging introduction to the tools they need to understand and predict strategic interactions. Beginning with an introduction to the most famous games, the book uses clear, jargon-free language and accessible maths as it guides the reader through whole games with full, worked-through examples. End-of-chapter exercises help to consolidate understanding along the way. With an applied approach that draws upon real-life case-studies, this book highlights the insights that game theory can offer each situation. It is an ideal textbook for students approaching game theory from various fields across the social sciences, and for curious general readers who are looking for a thorough introduction to this intriguing subject.

José Luis Ferreira is an Associate Professor at the Economics Department in Universidad Carlos III de Madrid, Spain.

Chapter 1. The most famous games 1.1 The coordination game 1.2 Choice of standards 1.3 The battle of the sexes 1.4 The chicken game 1.5 The prisoners' dilemma 1.6 Matching pennies 1.7 The ultimatum game Chapter 2. Building the theory for simultaneous games 2.1 The normal form game 2.2 Towards a solution 2.3 Some propositions on maximin strategies, rationalizable strategies and Nash equilibria 2.4 Finding the Nash equilibria 2.5 Complications in finding the Nash equilibria 2.6 The payoffs of the game and the mixed strategies Chapter 3. Static games 3.1 Fiscal battles 3.2 The median voter 3.3 The advantage of being indifferent 3.4 The broken windows theory 3.5 The independence of Sylvania 3.6 Cournot oligopoly 3.7 Bertrand oligopoly 3.8 Keeping up with the Joneses Chapter 4. Dynamic games 4.1 The extensive form. Backwards induction 4.2 The prisoners' dilemma with a previous contract 4.3 Subgame perfect Nash equilibrium 4.4 How to be credible (1): Elimination of strategies. Odysseus and the sirens 4.5 How to be credible (2): Acquire costly compromises. Who enters? 4.6 How to be credible (3): Give up control. Separation of powers 4.7 The consequences of not being credible. The health care game 4.8 The payment of the debt Chapter 5. Voting 5.1 Sincere and strategic voting 5.2 The manipulation of the agenda 5.3 Condorcet's paradox 5.4 Referendum with minimum participation 5.5 The Borda count 5.6 Arrow's theorem 5.7 The theorems by Gibbard-Satterthwaite and May 5.8 The median voter theorem 5.9 I'll scratch your back and you'll scratch mine 5.10 How to know the truth. The Groves-Clarke's mechanism 5.11 Do we know what do the people want? 5.12 The discursive dilemma 5.13 A referendum in Catalonia Chapter 6. Negotiation games 6.1 The model of offers and counteroffers 6.2 Impatience 6.3 Risk aversion 6.4 Negotiating with fanatics 6.5 Some discussion 6.6 An actual case: the hijacking of the Alakrana 6.7 The Coase theorem 6.8 When not to apply the Coase theorem Chapter 7. Repeated games 7.1 The Christmas truce 7.2 A game repeated twice 7.3 Cooperation in the infinite and indefinite repetitions 7.4 Some technical details 7.5 Other strategies in the repeated game 7.6 The cooperation in the prisoners' dilemma repeated finitely many times 7.7 What experiments say 7.8 What the empirical data say 7.9 Altruism, reciprocity and evolution 7.10 Not a zero-sum game 7.11 Axelrod's tournament Chapter 8. Agency problems: adverse selection 8.1 The agency problem 8.2 The information sets 8.3 If you didn't have anything to hide you'd show me your e-mails 8.4 Adverse selection in a first agency problem 8.5 Adverse selection and public health systems 8.6 Other examples of adverse selection 8.7 Other types of adverse selection 8.8 Competition reveals information: When the principal has information about the agent 8.9 On Rawls' original position and the ex-ante criterion Chapter 9. Agency problems: signaling and moral hazard 9.1 Signaling with a discrete variable 9.2 The empirical evidence of education as a signal 9.3 Signaling with a continuous variable and discrimination in the labor market 9.4 Moral hazard: Fixed payment or payment by performance? 9.5 Moral hazard: Copayment, yes or no? 9.6 Moral hazard: Work with teams and cooperatives Chapter 10. Seven applications of Game Theory 10.1 The battle of the Bismarck Sea 10.2 The nuclear war 10.3 You cannot use information without revealing it 10.4 You should bluff from time to time 10.5 There may not be weapons of mass destruction: should we still attack? 10.6 Is free trade a prisoners' dilemma? 10.7 Negotiations between Greece and the Troika Chapter 11. Seven more applications 11.1 The minority language 11.2 Pascal's Wager 11.3 The surprise exam paradox 11.4 The sentence as deterrence 11.5 Solidarity versus charity 11.6 Single round versus runoff elections 11.7 How to end with infractions Chapter 12. Dynamics 12.1 Evolutionary dynamics: The hawk-dove game 12.2 Imitation dynamics: A segregation model 12.3 Best-reply dynamics: The emergence of language 12.4 No weakly dominated strategies dynamics: Self-inflicted injuries 12.5 Adaptive dynamics: Voluntary contribution to the provision of public goods Chapter 13. Limited rationality and behavioral economics 13.1 Preferences changing with time: which ones deserve priority? 13.2 Time inconsistency and energy saving 13.3 Irrationality due to the complexity of the election 13.4 Irrationality due to overconfidence 13.5 The age of majority 13.6 Indoctrination 13.7 Nudging: when to let others influence you 13.8 On other irrationalities that are not so irrational 13.9 Towards a behavioral theory Chapter 14. Power indices 14.1 Cooperative and majority games 14.2 Power indices in majority games 14.3 Application of power indices to three parliaments 14.4 Games with many quotas 14.5 The distribution of power in the EU after Brexit 14.6 Power indices with abstention.