230332 :Microeconomics 2 (CentER)

General info

Instruction language English
Type of Instruction 30 hours of lectures and 20 hours of tutorials. (Lecture schedule)
Type of exams Written final exam (80%) and regular graded homework assignments (20%). (Examination schedule)
Course load:6 ECTS credits
Registration:via Blackboard
Blackboard InfoLink to Blackboard (When you see 'Guest are not allowed in this course', please login at Blackboard itself)


prof. dr. E.E.C. van Damme (Coordinator)

H.T. Apakan MSc (Teaching Assistent)


In this course we provide an introduction to game theory at the graduate level. This means that we will not just define the concepts and illustrate their use in applications, but rather also study their properties in detail and critically discuss their foundations. The largest part of the course is devoted to non-cooperative game theory, but the key ideas from cooperative game theory (bargaining, matching, core and value) and their relations with non-cooperative theory are discussed as well. Most of the course is devoted to "classical" (rationalistic) game theory, but at least one session is devoted to recent developments related to bounded rationality and behavioral game theory.


We start with strategic (static) games and reviewing the Nash equilibrium concept and its justifications. Several applications from various fields of economics are discussed. Thereafter, we move to games in extensive form with perfect (or almost perfect) information and discuss the concept of subgame perfect equilibrium. As applications, we study Rubinstein-type bargaining games and repeated games (including a discussion of the Folk Theorem). Subsequently, we discuss Bayesian games, that is, strategic form games with incomplete information, and the associated solution concept of Bayesian Nash equilibrium. We also provide a brief introduction to auction theory. Next, we move to extensive games with incomplete information, for which we study Perfect Bayesian Equilibria and Sequential Equilibria. As applications, we study bargaining, reputation formation and signaling games. This part (on "rationalistic" game theory) is concluded with a lecture on mechanism design, allowing us to discuss optimal auctions and the failure of the Coase Theorem in case of incomplete information.

In the remaining three lectures, we discuss bounded rationality, behavioral game theory and some key concepts from cooperative game theory. The latter include the Nash bargaining solution, the Core, the Shapley value, the nucleolus and Gale-Shapley matching problems, hence, we also provide an introduction to market design à la Al Roth. Concerning the former, we discuss to what extent equilibrium behavior is observed in the laboratory or in the field, what might explain systematic deviations and how these might be captured by theory. Our aim here is to bring studetns to the research frontier.

A detailed course syllabus is available on Blackboard.


Before enrolling all non-CentER students should ask permission to the Director of Graduate Studies in Economics. Please send your request for permission to CentER Graduate School at center-gs@uvt.nl.

Compulsory Reading

  1. M. Osborne, A. Rubinstein, A course in game theory, MIT Press, 1994, ISBN 0-262-65040-1. Can be downloaded for free from http://theory.economics.utoronto.ca/books/
  2. Articles to be assigned in class.
  3. Parts of the books: A. Mas-Colell, M.D. Whinston, and J.R. Green, Microeconomic Theory, Oxford University Press, 1995, ISBN 978-0-1950-7340-9 and D. Fudenberg, J. Tirole, Game Theory, MIT Press, 1991, ISBN 978-0-2620-6141-4.

Recommended Prerequisites

Prajit Dutta: Strategies and Games; Theory and Practice, MIT Press, 1999, ISBN: 9780262041690 9 2. Joel Watson: Strategy: An Introduction to Game Theory. W.W. Norton & Company, 2007. ISBN: 9780393929348. Steven Tadelis: Game Theory; An Introduction, Princeton University Press, 2013, ISBN: 9780691129082.

Required Prerequisites

Quantitative Methods (CentER) and Microeconomics 1 (CentER)

Compulsory for