JOEL WATSON
University of California, San Diego
Third Edition
CONTENTS*
PREFACE
1 INTRODUCTION
Noncooperative Game Theory
Contract and Cooperative Game Theory
The Meaning of "Game"
xiii
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viii
Contents
5 GENERAL ASSUMPTIONS AND METHODOLOGY
Rationality
Common Knowledge
Overview of Solution Concepts
The Issue of Realism
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7g
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Contents
The Third Strategic Tension
Congruous Sets
Aside: Experimental Game Theory
Guided Exercise
Exercises
10 OLIGOPOLY, TARIFFS, CRIME, AND VOTING
Cournot Duopoly Model
Bertrand Duopoly Model
Tariff Setting by Two Countries
A Model of Crime and Police
The Median Voter Theorem
Strategic Voting
Guided Exercise
Exercises
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108
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132
Randomization in Sports
Technical Notes
Example: Duopoly with Capacity Constraints
Guided Exercise
Exercises
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Contents
PART III: ANALYZING BEHAVIOR IN DYNAMIC SETTINGS
173
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18 BARGAINING PROBLEMS
Bargaining: Value Creation and Division
An Abstract Representation of Bargaining Problems
An Example
The Standard Bargaining Solution
A Note About Legal Default Rules
Guided Exercise
Exercises
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Contents
19 ANALYSIS OF SIMPLE BARGAINING GAMES
Ultimatum Games: Power to the Proposer
Two-Period, Alternating-Offer Games: Power to the Patient
Infinite-Period, Alternating-Offer Game
Multilateral B argaining
Guided Exercise
Exercises
20 GAMES WITH JOINT DECISIONS;
NEGOTIATION EQUILIBRIUM
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Joint Decisions
Negotiation Equilibrium
Example: Contracting for High-Powered Incentives
Guided Exercise
Exercises
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Hold-Up Example
Up-Front Contracting and Option Contracts
Asset Ownership
Guided Exercise
Exercises
22 REPEATED GAMES AND REPUTATION
A Two-Period Repeated Game
An Infinitely Repeated Game
The Equilibrium Payoff Set with Low Discounting
Guided Exercise
Exercises
23 COLLUSION, TRADE AGREEMENTS, AND GOODWILL
Dynamic Oligopoly and Collusion
Enforcing International Trade Agreements
Goodwill and Trading a Reputation
Guided Exercise
Exercises
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Contents
PART IV: INFORMATION
325
327
Guided Exercise
Exercises
25 RISK AND INCENTIVES IN CONTRACTING
Risk Aversion
A Principal-Agent Game
Guided Exercise
Exercises
26 BAYESIAN NASH EQUILIBRIUM AND RATIONALIZABILITY
Guided Exercise
Exercises
27 LEMONS, AUCTIONS, AND INFORMATION AGGREGATION
Markets and Lemons
Auctions
Information Aggregation
Guided Exercise
Exercises
28 PERFECT BAYESIAN EQUILIBRIUM
Conditional Beliefs about Types
Sequential Rationality
Consistency of Beliefs
Equilibrium Definition
Guided Exercise
Exercises
29 JOB-MARKET SIGNALING AND REPUTATION
Jobs and School
Reputation and Incomplete Information
Guided Exercise
Exercises
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3g4
3gg
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3gg
4QQ
APPENDICES
407
INDEX
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