GAMES AND INFORMATION, THIRD EDITION
An Introduction to Game Theory
Eric Rasmusen
Basil Blackwell
Contents (starred sections are less important)
April 30, 1999
Preface
Contents and Purpose
Changes in the Second Edition
Changes in the Third Edition
Using the Book
The Level of Mathematics
Other Books
Acknowledgements
Introduction
History
Game Theory's Method
Exemplifying Theory
This Book's Style
Notes
PART I GAME THEORY
1 The Rules of the Game
1.1 Basic Definitions
1.2 Dominant Strategies: The Prisoner's Dilemma
1.3 Iterated Dominance: The Battle of the Bismarck Sea
1.4 Nash Equilibrium: Boxed Pigs, The Battle of the Sexes, and Ranked Coordination
1.5 Focal Points
Notes
Problems for Chapter 1
2 Information
2.1 The Extensive Form of a Game
2.2 Information Sets
2.3 Perfect, Certain, Symmetric, and Complete Information
2.4 The Harsanyi Transformation and Bayesian Games
*2.5 Example: The Png Settlement Game
Notes
Problems for Chapter 2
3 Continuous and Mixed Strategies
3.1 Mixed Strategies: The Welfare Game
3.2 Chicken, The War of Attrition, and Correlated Strategies
3.3 Mixed Strategies with General Parameters and N Players: The Civic Duty Game
3.4 Randomizing versus Mixing: The Auditing Game
3.5 Continuous Strategies: The Cournot Game
Notes
Problems for Chapter 3
4 Dynamic Games with Symmetric Information
4.1 Subgame Perfectness
4.2 An Example of Perfectness: Entry Deterrence I
4.3 Credible Threats, Sunk Costs, and the Open-Set Problem in Nuisance Suits
4.4 Recoordination to Pareto Dominant Equilibria in Subgames: Pareto Perfection
Notes
Problems for Chapter 4
5 Reputation and Repeated Games
5.1 Finitely Repeated Games and the Chainstore Paradox
5.2 Infinitely Repeated Games, Minimax Punishments, and the Folk Theorem
5.3 Reputation: The One-Sided Prisoner's Dilemma
5.4 Product Quality in an Infinitely Repeated Game
*5.5 Markov Equilibria and Overlapping Generations in Customer Switching Costs
*5.6 Evolutionary Equilibrium: The Hawk-Dove Game (formerly Section 4.6)
Notes
Problems for Chapter 5
6 Dynamic Games with Asymmetric Information
6.1 Perfect Bayesian Equilibrium: Entry Deterrence II and III
6.2 Refining Perfect Bayesian Equilibrium: PhD Admissions
6.3 The Importance of Common Knowledge: Entry Deterrence IV and V
6.4 Incomplete Information in the Repeated Prisoner's Dilemma: The Gang of Four Model
6.5 The Axelrod Tournament
*6.6 Why Established Firms Pay Less for Capital: The Diamond Model (formerly Section 15.1)
Notes
Problems for Chapter 6
PART II ASYMMETRIC INFORMATION
7 Moral Hazard: Hidden Actions
7.1 Categories of Asymmetric Information Models
7.2 A Principal-Agent Model: The Production Game
7.3 The Incentive Compatibility, Participation, and Competition Constraints
7.4 Optimal Contracts: The Broadway Game
Notes
Problems for Chapter 7
8 Further Topics in Moral Hazard
8.1 Efficiency Wages (formerly Section 8.4)
8.2 Institutions and Agency Problems (formerly Section 8.6)
*8.3 Renegotiation: The Repossession Game
*8.4 State-Space Diagrams: Insurance Games I and II (formerly Section 7.5)
*8.5 Joint Production by Many Agents: The Holmstrom Teams Model (formerly Section 8.7)
Notes
Problems for Chapter 8
9 Adverse Selection
9.1 Introduction: Production Game V
9.2 Adverse Selection under Certainty: Lemons I and II
9.3 Heterogeneous Tastes: Lemons III and IV
9.4 Adverse Selection under Uncertainty: Insurance Game III
*9.5 Other Equilibrium Concepts: Wilson Equilibrium and Reactive Equilibrium
*9.6 A Variety of Applications
*9.7 Market Microstructure and the Kyle Model (formerly Section 15.3)
Notes
Problems for Chapter 9
9A Mechanism Design in Adverse Selection and in Moral Hazard with Hidden Information
9A.1 Pooling versus Separating Equilibrium and the Revelation Principle (formerly
Section 8.1)
9A.2 An Example of Moral Hazard with Hidden Knowledge: The Salesman Game (formerly Section
8.2)
9A.3 Tournaments (formerly Section 8.5)
9A.4 Rate of Return Regulation and Government Procurement (formerly Section 15.4)
9A.5 Setting up a Way to Bargain: The Myerson-Satterthwaite Mechanism
*9A.6 The Groves Mechanism
*9A.7 Price Discrimination
Notes
Problems for Chapter 9A
10 Signalling
10.1 The Informed Player Moves First: Signalling
10.2 Variants on the Signalling Model of Education
10.3 General Comments on Signalling in Education
10.4 The Informed Player Moves Second: Screening
*10.5 Two Signals: Underpricing of Stock
*10.6 Signal Jamming: Limit Pricing (formerly Section 14.2)
Notes
Problems for Chapter 10
PART III APPLICATIONS
11 Bargaining
11.1 The Basic Bargaining Problem: Splitting a Pie
11.2 The Nash Bargaining Solution
11.3 Alternating Offers over Finite Time
11.4 Alternating Offers over Infinite Time
11.5 Incomplete Information
Notes
Problems for Chapter 11
12 Auctions
12.1 Auction Classification and Private-Value Strategies
12.2 Comparing Auction Rules
12.3 Risk and Uncertainty over Values
12.4 Common-Value Auctions and the Winner's Curse
12.5 Information in Common-Value Auctions
Notes
Problems for Chapter 12
13 Pricing
13.1 Quantities as Strategies: Cournot Equilibrium Revisited
13.2 Prices as Strategies: Bertrand Equilibrium
13.3 Location Models
*13.4 Comparative Statics and Supermodular Games
*13.5 Durable Monopoly
Notes
Problems for Chapter 13
*14 Entry
*14.1 Innovation and Patent Races
*14.2 Takeovers and Greenmail (formerly Section 15.2)
*14.3 Predatory Pricing: The Kreps-Wilson Model
*14.4 Entry for Buyout
Notes
Problems for Chapter 14
*A. Mathematical Appendix
*A.1 Notation
*A.2 Glossary
*A.3 Formulas and Functions
*A.4 Probability Distributions
*A.5 Supermodularity
*A.6 Fixed-Point Theorems
*A.7 Genericity
*A.8 Discounting (formerly Section 4.5)
*A.9 Risk
References and Name Index
Subject Index
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