Strategy: An Introduction to Game Theory / Edition 3

by Joel Watson

Overview

The perfect balance of readability and formalism.

Joel Watson has refined his successful text to make it even more student-friendly. A number of sections have been added, and numerous chapters have been substantially revised. Dozens of new exercises have been added, along with solutions to selected exercises. Chapters are short and focused, with just the right amount of mathematical content and end-of-chapter exercises. New passages walk students through tricky topics.

Product Details

ISBN-13:	9780393123876
Publisher:	Norton, W. W. & Company, Inc.
Publication date:	05/09/2013
Edition description:	Third Edition
Pages:	512
Product dimensions:	6.70(w) x 9.00(h) x 1.20(d)

About the Author

Joel Watson is Professor of Economics at the University of California, San Diego. He received his BA from UCSD and his PhD from Stanford. Watson is one of the top game theorists of his generation, and his work has been published in a variety of leading journals, including The American Economic Review, Econometrica, Journal of Economic Theory, Quarterly Journal of Economics, and Games and Economic Behavior.

Table of Contents

	Preface	xiii
1	Introduction	1
	Noncooperative Game Theory	2
	Contract and Cooperative Game Theory	4
	The Meaning of "Game"	5
Part I	Representing Games	7
2	The Extensive Form	9
	Other Examples and Conventions	15
	Exercises	19
3	Strategies	23
	Exercises	27
4	The Normal Form	29
	Classic Normal-Form Games	30
	Interpretation of the Normal Form	32
	Exercises	34
5	Beliefs, Mixed Strategies, and Expected Utility	38
	Exercises	40
Part II	Analyzing Behavior in Static Settings	43
6	Dominance and Best Response	45
	Dominance	45
	The First Strategic Tension and the Prisoners' Dilemma	47
	The Concept of Efficiency	49
	Best Response	50
	Dominance and Best Response Compared	52
	Exercises	55
7	Rationalizability and Iterated Dominance	58
	The Second Strategic Tension	61
	Exercises	63
8	Location and Partnership	67
	A Location Game	67
	A Partnership Game: Strategic Complementarities	70
	Exercises	76
9	Congruous Strategies and Nash Equilibrium	79
	Congruous Sets	81
	Nash Equilibrium	82
	Equilibrium of the Partnership Game	86
	Coordination and Social Welfare	87
	The Third Strategic Tension	89
	Aside: Behavioral Game Theory	90
	Exercises	92
10	Oligopoly, Tariffs, and Crime and Punishment	95
	Cournot Duopoly Model	95
	Bertrand Duopoly Model	97
	Tariff Setting by Two Countries	98
	A Model of Crime and Police	99
	Exercises	100
11	Mixed-Strategy Nash Equilibrium	104
	Exercises	106
12	Strictly Competitive Games and Security Strategies	111
	Exercises	113
13	Contract, Law, and Enforcement in Static Settings	115
	Complete Contracting in Discretionary Environments	119
	Contracting with Court-Imposed Breach Remedies	122
	Exercises	127
Part III	Analyzing Behavior in Dynamic Settings	131
14	Details of the Extensive Form	133
	Exercises	136
15	Backward Induction and Subgame Perfection	137
	Sequential Rationality and Backward Induction	138
	Subgame Perfection	141
	Exercises	145
16	Topics in Industrial Organization	150
	Advertising and Competition	150
	A Model of Limit Capacity	152
	Dynamic Monopoly	155
	Price Guarantees as a Commitment to High Prices	159
	Exercises	161
17	Parlor Games	165
	Exercises	167
18	Bargaining Problems	170
	Bargaining: Value Creation and Division	170
	An Abstract Representation of Bargaining Problems	172
	An Example	174
	The Standard Bargaining Solution	176
	Exercises	178
19	Analysis of Simple Bargaining Games	180
	Ultimatum Games: Power to the Proposer	180
	Two-Period, Alternating-Offer Games: Power to the Patient	182
	Infinite-Period, Alternating-Offer Game	186
	Exercises	187
20	Games with Joint Decisions; Negotiation Equilibrium	191
	Joint Decisions	192
	Negotiation Equilibrium	194
	Example: Contracting for High-Powered Incentives	195
	Exercises	197
21	Investment, Hold Up, and Ownership	201
	Hold Up Example	201
	Asset Ownership	203
	Exercises	205
22	Repeated Games and Reputation	210
	A Two-Period Repeated Game	211
	An Infinitely Repeated Game	216
	The Equilibrium Payoff Set with Low Discounting	219
	Exercises	223
23	Collusion, Trade Agreements, and Goodwill	227
	Dynamic Oligopoly and Collusion	227
	Enforcing International Trade Agreements	229
	Goodwill and Trading a Reputation	230
	Exercises	233
Part IV	Information	237
24	Random Events and Incomplete Information	239
	Exercises	243
25	Risk and Incentives in Contracting	245
	Risk Aversion	245
	A Principal-Agent Game	249
	Exercises	254
26	Bayesian Nash Equilibrium and Rationalizability	256
	Exercises	258
27	Trade with Incomplete Information	262
	Markets and Lemons	262
	Auctions	264
	Exercises	269
28	Perfect Bayesian Equilibrium	272
	Conditional Beliefs about Types	273
	Sequential Rationality	274
	Consistency of Beliefs	275
	Equilibrium Definition	276
	Exercises	278
29	Job-Market Signaling and Reputation	282
	Jobs and School	282
	Reputation and Incomplete Information	285
	Exercises	288
	Appendices	293
A	Review of Mathematics	295
	Sets	295
	Functions and Calculus	297
	Probability	301
B	The Mathematics of Rationalizability	307
	Dominance, Best Response, and Correlated Conjectures	307
	Rationalizability Construction	311
	Exercises	313
	Index	315