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| Preface | |
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| Rational Decision Making | |
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| The Single-Person Decision Problem | |
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| Actions, Outcomes, and Preferences | |
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| Preference Relations | |
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| Payoff Functions | |
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| The Rational Choice Paradigm | |
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| Summary | |
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| Exercises | |
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| Introducing Uncertainty and Time | |
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| Risk, Nature, and Random Outcomes | |
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| Finite Outcomes and Simple Lotteries | |
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| Simple versus Compound Lotteries | |
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| Lotteries over Continuous Outcomes | |
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| Evaluating Random Outcomes | |
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| Expected Payoff: The Finite Case | |
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| Expected Payoff: The Continuous Case | |
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| Caveat: It's Not Just the Order Anymore | |
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| Risk Attitudes | |
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| The St. Petersburg Paradox | |
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| Rational Decision Making with Uncertainty | |
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| Rationality Revisited | |
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| Maximizing Expected Payoffs | |
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| Decisions over Time | |
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| Backward Induction | |
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| Discounting Future Payoffs | |
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| Applications | |
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| The Value of Information | |
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| Discounted Future Consumption | |
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| Theory versus Practice | |
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| Summary | |
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| Exercises | |
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| Static Games of Complete Information | |
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| Preliminaries | |
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| Normal-Form Games with Pure Strategies | |
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| Example: The Prisoner's Dilemma | |
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| Example: Cournot Duopoly | |
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| Example: Voting on a New Agenda | |
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| Matrix Representation: Two-Player Finite Game | |
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| Example: The Prisoner's Dilemma | |
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| Example: Rock-Paper-Scissors | |
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| Solution Concepts | |
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| Assumptions and Setup | |
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| Evaluating Solution Concepts | |
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| Evaluating Outcomes | |
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| Summary | |
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| Exercises | |
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| Rationality and Common Knowledge | |
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| Dominance in Pure Strategies | |
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| Dominated Strategies | |
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| Dominant Strategy Equilibrium | |
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| Evaluating Dominant Strategy Equilibrium | |
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| Iterated Elimination of Strictly Dominated Pure Strategies | |
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| Iterated Elimination and Common Knowledge of Rationality | |
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| Example: Cournot Duopoly | |
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| Evaluating IESDS | |
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| Beliefs, Best Response, and Rationalizability | |
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| The Best Response | |
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| Beliefs and Best-Response Correspondences | |
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| Rationalizability | |
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| The Cournot Duopoly Revisited | |
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| The "p-Beauty Contest" | |
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| Evaluating Rationalizability | |
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| Summary | |
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| Exercises | |
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| Pinning Down Beliefs: Nash Equilibrium | |
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| Nash Equilibrium in Pure Strategies | |
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| Pure-Strategy Nash Equilibrium in a Matrix | |
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| Evaluating the Nash Equilibria Solution | |
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| Nash Equilibrium: Some Classic Applications | |
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| Two Kinds of Societies | |
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| The Tragedy of the Commons | |
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| Coumot Duopoly | |
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| Bertrand Duopoly | |
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| Political Ideology and Electoral Competition | |
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| Summary | |
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| Exercises | |
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| Mixed Strategies | |
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| Strategies, Beliefs, and Expected Payoffs | |
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| Finite Strategy Sets | |
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| Continuous Strategy Sets | |
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| Beliefs and Mixed Strategies | |
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| Expected Payoffs | |
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| Mixed-Strategy Nash Equilibrium | |
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| Example: Matching Pennies | |
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| Example: Rock-Paper-Scissors | |
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| Multiple Equilibria: Pure and Mixed | |
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| IESDS and Rationalizability Revisited | |
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| Nash's Existence Theorem | |
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| Summary | |
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| Exercises | |
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| Dynamic Games of Complete Information | |
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| Preliminaries | |
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| The Extensive-Form Game | |
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| Game Trees | |
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| Imperfect versus Perfect Information | |
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| Strategies and Nash Equilibrium | |
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| Pure Strategies | |
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| Mixed versus Behavioral Strategies | |
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| Normal-Form Representation of Extensive-Form Games | |
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| Nash Equilibrium and Paths of Play | |
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| Summary | |
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| Exercises | |
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| Credibility and Sequential Rationality | |
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| Sequential Rationality and Backward Induction | |
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| Subgame-Perfect Nash Equilibrium: Concept | |
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| Subgame-Perfect Nash Equilibrium: Examples | |
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| The Centipede Game | |
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| Stackelberg Competition | |
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| Mutually Assured Destruction | |
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| Time-Inconsistent Preferences | |
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| Summary | |
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| Exercises | |
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| Multistage Games | |
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| Preliminaries | |
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| Payoffs | |
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| Strategies and Conditional Play | |
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| Subgame-Perfect Equilibria | |
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| The One-Stage Deviation Principle | |
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| Summary | |
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| Exercises | |
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| Repeated Games | |
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| Finitely Repeated Games | |
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| Infinitely Repeated Games | |
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| Payoffs | |
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| Strategies | |
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| Subgame-Perfect Equilibria | |
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| Application: Tacit Collusion | |
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| Sequential Interaction and Reputation | |
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| Cooperation as Reputation | |
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| Third-Party Institutions as Reputation Mechanisms | |
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| Reputation Transfers without Third Parties | |
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| The Folk Theorem: Almost Anything Goes | |
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| Summary | |
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| Exercises | |
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| Strategic Bargaining | |
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| One Round of Bargaining: The Ultimatum Game | |
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| Finitely Many Rounds of Bargaining | |
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| The Infinite-Horizon Game | |
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| Application: Legislative Bargaining | |
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| Closed-Rule Bargaining | |
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| Open-Rule Bargaining | |
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| Summary | |
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| Exercises | |
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| Static Games of Incomplete Information | |
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| Bayesian Games | |
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| Strategic Representation of Bayesian Games | |
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| Players, Actions, Information, and Preferences | |
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| Deriving Posteriors from a Common Prior: A Player's Beliefs | |
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| Strategies and Bayesian Nash Equilibrium | |
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| Examples | |
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| Teenagers and the Game of Chicken | |
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| Study Groups | |
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| Inefficient Trade and Adverse Selection | |
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| Committee Voting | |
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| Mixed Strategies Revisited: Harsanyi's Interpretation | |
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| Summary | |
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| Exercises | |
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| Auctions and Competitive Bidding | |
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| Independent Private Values | |
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| Second-Price Sealed-Bid Auctions | |
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| English Auctions | |
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| First-Price Sealed-Bid and Dutch Auctions | |
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| Revenue Equivalence | |
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| Common Values and the Winner's Curse | |
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| Summary | |
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| Exercises | |
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| Mechanism Design | |
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| Setup: Mechanisms as Bayesian Games | |
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| The Players | |
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| The Mechanism Designer | |
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| The Mechanism Game | |
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| The Revelation Principle | |
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| Dominant Strategies and Vickrey-Clarke-Groves Mechanisms | |
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| Dominant Strategy Implementation | |
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| Vickrey-Clarke-Groves Mechanisms | |
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| Summary | |
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| Exercises | |
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| Dynamic Games of Incomplete Information | |
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| Sequential Rationality with Incomplete Information | |
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| The Problem with Subgame Perfection | |
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| Perfect Bayesian Equilibrium | |
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| Sequential Equilibrium | |
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| Summary | |
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| Exercises | |
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| Signaling Games | |
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| Education Signaling: The MBA Game | |
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| Limit Pricing and Entry Deterrence | |
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| Separating Equilibria | |
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| Pooling Equilibria | |
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| Refinements of Perfect Bayesian Equilibrium in Signaling Games | |
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| Summary | |
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| Exercises | |
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| Building a Reputation | |
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| Cooperation in a Finitely Repeated Prisoner's Dilemma | |
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| Driving a Tough Bargain | |
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| A Reputation for Being "Nice" | |
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| Summary | |
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| Exercises | |
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| Information Transmission and Cheap Talk | |
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| Information Transmission: A Finite Example | |
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| Information Transmission: The Continuous Case | |
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| Application: Information and Legislative Organization | |
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| Summary | |
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| Exercises | |
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| Mathematical Appendix | |
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| Sets and Sequences | |
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| Basic Definitions | |
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| Basic Set Operations | |
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| Functions | |
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| Basic Definitions | |
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| Continuity | |
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| Calculus and Optimization | |
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| Basic Definitions | |
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| Differentiation and Optimization | |
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| Integration | |
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| Probability and Random Variables | |
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| Basic Definitions | |
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| Cumulative Distribution and Density Functions | |
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| Independence, Conditional Probability, and Bayes' Rule | |
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| Expected Values | |
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| References | |
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| Index | |