Game Theory (econ 414)


Online Syllabus

Spring 2014

Instructor: Nuno Limão


Sections:      101              /201

4118K Tydings Hall, x57842


Time: Tu Th 9:30-10:45/11:00-12:15


Location: TYD 1108

Off. hrs: Th 13:45-14:45 or by appt.




Our objective is learning basic concepts and tools to identify and analyze situations characterized by strategic interdependence—where an individual’s payoff depends on another’s actions. These situations are ubiquitous in Economics (and other Social Sciences), and thus Game Theory is essential for understanding a range of issues that include decisions by individuals in (i) firms (e.g. market-entry, production,  pricing, hiring and monitoring workers); (ii) households (e.g. work effort, insurance) and (iii) governments (e.g. market regulation, fiscal and monetary policy commitments, international agreement negotiation). We will learn how to translate specific strategic interactions into a game, how to solve it, and when appropriate, whether a game’s predictions are supported by empirical evidence.




This course is designed for Economics' majors. You must have taken intermediate micro (ECON326) and a statistics course (ECON321 or STAT400) with a grade of 'C-' or better . You should be very comfortable with using the concepts and tools taught in those courses, since we will build on them.



·            The final grade will be a weighted average of the following (dates in the schedule)  

§  Four problem sets (20%)

§  Two midterms        (40%)

§  One final exam       (40%)

·            Extra credit: The game theory we will learn is motivated by important real-world strategic interactions. One way to learn how to reason in such situations and whether these theories are relevant is to play the “games” and we will try to do so in class. Your participation in these games will be worth up to 10% extra credit toward your final grade.

·            The exam questions will be based on all the material covered in class, required readings and problem sets assigned before the exam. The final will be cumulative.

·            Exams are closed book and closed notes.

·            Problem sets are open book and you can discuss questions with other students but you must hand in your individual and original answers. I will post the questions and solutions on ELMS.

·            All assignments must be completed by the deadline (start of class for PS). There will be no make-up exams except under one of the three exceptions stipulated by the university: illness supported by a doctor's letter, religious holidays or participation in University activities at the request of university authorities. You must contact me prior to the exam/assignment date in order to reschedule.

·            If you have a documented disability registered with the DSS office and require special arrangements for an exam you must provide the documentation one week before the first exam.

·            I strongly recommend you attend the class and prepare in advance for it by reading the relevant material listed below for each topic. Any notes I make available in ELMS will be outlines and not a substitute for the material covered in class.

·            I also strongly recommend that you do the suggested exercises to check your understanding of the material on an ongoing basis.

·            Plagiarism and cheating. The University of Maryland, College Park has a nationally recognized Code of Academic Integrity, administered by the Student Honor Council. This Code sets standards for academic integrity at Maryland for all undergraduate and graduate students.  As a student you are responsible for upholding these standards for this course.  It is very important for you to be aware of the consequences of cheating, fabrication, facilitation, and plagiarism.  For more information on the Code of academic Integrity or the Student Honor Council, please visit


Textbook (available at the campus bookstore and in reserve at Mckeldin)

·            Harrington, J. Games, Strategy and Decision Making, 2009, Worth Publishing.


Course outline and basic reading list

This outline and the schedule provide a basic guide for the topics and chapters in parenthesis that we will cover.

1.        Introduction to Game Theory

1.1            What is Game Theory?                                              (1)

1.2            Defining and Modeling Games                                (2)

2.        Static Games

2.1            Dominant and Dominated Strategies                    (3)

2.2            Nash Equilibrium

2.2.1     Pure Strategies                               (4, 5, 6)

2.2.2     Mixed Strategies                            (7)

3.        Dynamic Games

3.1            Sequential Games of Perfect Information            (8)

3.2            Sequential Games of Imperfect Information       (9)

4.        Repeated Games                                                                                            (13, 14)

5.        Incomplete Information Games

5.1            Static Games: Private Information                         (10)

5.2            Dynamic Games: Signaling                                       (11)



Related course materials online

·            Glossary of Game Theory terms

·            Game Theory and Experimental Economics

·            In-class experimental software (Charles Holt’s Vecon lab)

·            Interactive games and application links

·            Participate in experiments at the UMD Economics Lab

·            Game Theory in popular culture

·            Game Theory in the news