STRATEGIC ANALYSIS FOR ECONOMICS AND POLICY
- Knowledge and understanding: The student must demonstrate knowledge and understanding of the issues related to the strategic interaction of economic subjects.
-Capacity to Apply Knowledge and Understanding: The student must demonstrate that he/she is able to design strategic interactions in various economic contexts and to recognize equilibria.
-Judging autonomy: -The student must be able to know how to evaluate strategic interactions and to indicate the main methodologies (Nash Refinements) relevant to such interactions.
-Communicative Skills: -The student must have the ability to explain strategic interactions and refinements designed to select the equilibrium, using the correct scientific language.
-Learning Abilities: -The student must be able to update his / her strategic background, through consultation of texts and publications suggested during the course and to continue autonomously in the reading of introductory texts of game theory applied to the economy and political economics.
It is necessary to acquire and assimilate the knowledge provided by the courses of "Microeconomics", "Statistics" and "Mathematics". In particular:
- market frameworks, in particular the duopoly market;
- introduction to probability theory;
- elementary algebra.
Block 1: Preliminary Concepts Strategic Interaction (h. 24)
Topic 1: Preliminary Concepts: Concept of probability and expected utility theory;
Topic 2: Rules of the game; Representation of games;
Topic 3: Pure and mixed strategies;
Topic 4: Role of information: complete-incomplete-imperfect;
Topic 5: Solutions for constant-sum games;
Topic 6: Basic concepts of the theory in the solution of non-cooperative games.
Topic 7: Iterated elimination of strictly dominated strategies;
Topic 8: Nash equilibrium; "Refinements" of the concept of equilibrium;
Topic 9: Subgame Perfect Nash Equilibrium;
Topic 10: THPE (Trembling Hand Perfect Equilibrium).
Block 2: Sequential and Dynamic Games (h. 30)
Topic 1: Rubinstein’s dynamic bargaining model;
Topic 2: Repeated games and endogenous cooperation: Folk Theorem (Grim strategies and Tit-for-Tat);
Topic 3: Games with incomplete information. Bayes' theorem;
Topic 4: The Bayesian equilibrium, Bayesian Theory of Games;
Topic 5: Perfect Bayesian equilibrium;
Topic 6: Signaling games.
Block 3: Applications (h.18)
Topic 1: Duopoly with complete and incomplete information;
Topic 2: Conflicts between institutions (eg government and central bank, entrepreneurs unions and trade unions);
Topic 3: Conflicts between international institutions (eg difficulties in coordinating economic and trade policies, difficulties in coordinating environmental issues);
Topic 4: The conflict in Public Goods.
The goal is to introduce the method of analysis of game theory, providing, at an introductory but rigorous level, the necessary tools to analyze the strategic interaction between individuals and rational institutions. These tools are a necessary condition for the student who wants to analyze economic relationships and, therefore, abandon the basic(and unrealistic) instructional paradigm of a single representative agent which maximizes against “Nature”.
The course after introducing the definitions and tools of the Game Theory will provide a series of applications to various strategic contexts involving firms, national institutions and in general the formation of so-called "social dilemmas" defined by national and international public goods (duopoly markets in different contexts of information, reputational equilibria and problems of temporal inconsistency in monetary policy; the conflict approach to the problems of international co-ordination of economic policies and to the environmental issues (greenhouse gas emissions).
Lectures and exercises with active participation of students.
Reference texts are used to learn techniques and tools, while "Lessons" and "Other Teaching Materials" serve to introduce theoretical tools and application contexts of the course.
1) Chiarini Bruno, Un Mondo in Conflitto, Teoria dei Giochi Applicata, Mondadori 2017 SECOND EDITION.
This text refers to Topic 1-10 of Block 1, and Topic 1-6 of Block 2.
2) Colombo Ferdinando, Introduzione alla Teoria dei Giochi, Carocci 2007.
This text refers to Topic 1-9 of Block 1, and Topic 3-6 of Block 2.
3) The lessons are available in PDF on the teacher’s website, on that of the Faculty and on the e-learning portal, where they can be downloaded.
The material refers to Topic 1-10 of Block 1; Topics 1-6 of Block 2, and Topics 1-4, of Block 3.
4) Other teaching materials: Papers and various educational materials, suggested by the teacher during the course
Additional material can refer to Topic 1-10 of Block 1; Topics 1-6 of Block 2 and Topics 1-2 of Block 3.
The specific contents of the course are evaluated through a written exam test with an appropriate number of questions and exercises. The evaluation is addressed to explore the students’ knowledge and understanding, but also their autonomous conduct of the problem, as well as their ability to implement solutions and equilibria to the various economic context.
-Composition test: The test is composed mostly of exercises, plus some open traces, and sometimes a multiple-choice question. Obviously, this composition changes in relation to the complexities of the various components.
-Time available: 75 minutes
- Paper space available: 3 pages + one page for calculations.
- Paper Available: must be provided by the teacher.
-Rules defined by the teacher: You can not go to the bathroom during the test
-Rules defined by the teacher: Use allowed calculator;
-Rules defined by the teacher: No use of the calculator of the mobile phone.
-Rules defined by the teacher: if there are rounds, they must necessarily take place on the same day.
-Rules defined by the teacher: generally there is an intermediate test on 2/3 of the program. The vote (18-30), is multiplied by 2/3, and compiles the weighted average with the remaining vote (multiplied by 1/3) of the final test. The score obtained during the test is valid in the two subsequent appeals.
-Rules defined by the teacher: any cheating practice will lead to the annulment of the test.
The test involves all the topics discussed in the course and aims to evaluate the student learning and understanding of the basic arguments. The test has selection character. The test also aim to evaluate the student ability to synthesize answers and problems. A student who does not show enough knowledge of the subjects does not pass the test, obtaining a negative judgment that assumes a vote below 18. To pass the test, it is not possible to sum up the votes on the individual components that constitute the script (exercises, open questions, multiple answers) but the relative importance of the test components is at the discretion of the teacher. The importance of subjects and the complexity of the strategic questions are, however, repeatedly advertised during the course.