The course aims to explore Game Theory with applications to economic, social, political, business, and legal issues. This includes understanding of backward induction, Nash equilibrium, self-interest v. collective interest, credible commitment, simultaneous and sequential games of complete and incomplete information, repeated games, and game theory in economic development. Along the way, the students would learn the work of several Nobel Laureates in Economics; about a dozen won the prize between 1994 and 2017 for their work related to game theory.
The purpose of game theory is to predict how a game might be played. A game arises when a player’s payoff depends on what others do. A game has players (e.g., individuals, animals, genes, organizations, nations) and rules (e.g., who moves in what order), and each player has strategies (e.g., cooperate or defect; fight or not fight), information pertaining to the game, and payoffs under each scenario. The idea is to find solution(s): one strategy for each player such that the strategies are best responses to each other.
Almost every economic, social or political interaction is a game. Applications include problems associated with cooperation (as in Prisoner’s Dilemma game or Trust game), bargaining (e.g., labor-management, buyer-seller, government-government), auctions (e.g., auction of wireless spectrum or public projects), pricing, principal-agent relations, contracting, signaling, committee decisionmaking, political competition, microfinance, and Economic Development.
Krishna K Ladha
Professor at ISPP, Distinguished Fellow at India Development Foundation