How Do We Play Games?

Who doesn’t like to play games? However, not everyone realizes that there is a rich and unified theory about how games are played, no matter which game you have in mind - from the Monopoly board game to your favorite sport like baseball. In the more general sense, political contentions and trade treaty talks are all “games”, or more formally, complex interactions among interdependent strategic decision makers. This 3-nighter will help you to understand different types of games and various ways of predicting game outcomes.

An alternative title of this 3-nighter can be “A Short Introduction to Game Theory”. For more than half a century, game theory has led to revolutionary developments in economics, and has also found important applications in politics, sociology, psychology, and engineering. Although game theory can be highly mathematical, this 3-nighter will take a problem-centric approach and does not have any formal prerequisites. All you need are the strong intellectual curiosity and the willingness of going through some rigorous mathematical thinking.

To take this course, you watch 1 hour of video (divided into four lectures) each night, and in 3 nights' time it's done. You will get a sense of accomplishment instantly over, say, a weekend.

Night 1: Simultaneous Move Games

We will focus on the games where players make simultaneous strategic decisions. Through the examples of prisoner’s dilemma, stag hunt, battle of sexes, hawk-dove game, and matching pennies, we will explain the concepts of strictly dominant/dominated strategies and best responses, and teach how to predict pure and mixed strategy Nash equilibria for finite games.

Night 2: Sequential Move Games

We will focus on the games where players make sequential strategic moves over multiple stages. Through the examples of market entry games I/II/III, Dr. Strangelove, sequential battle of sexes, and nuisance suit, we will explain the concepts of backward induction and subgame perfect Nash equilibrium, and show how to make credible threats and commitments.

Night 3: Advanced Topics

We will touch some advanced and even controversial topics in game theory. We will look at the equilibrium prediction for continuous games, through the example of Cournot market competition and second price auction. We will also discuss how limited cognition capability and physiological considerations might lead to (and explain) the gap between theory and practice.