Directed Readings on Game Theory
Fall 1997, Emory University
Friday 10:00a-11:30a

Professor: Eric Reinhardt
Office: 330 Social Sciences Building
Phone: 727-4977
Office hours: Tuesdays 2:00-5:00 pm and by appointment
Email: erein@emory.edu
WWW: http://userwww.service.emory.edu/~erein/

This is an independent study, directed readings course for advanced graduate students. The prerequisite is an introductory course on game theory.

The course is a forum for studying advanced game theory, with a heavy emphasis on applications of political interest. Here you will learn the invaluable skill of interpreting game theoretic models, and hopefully as well the creative insight necessary to generate interesting new models of your own. As you will find, doing game theory on your own is much more a matter of intuition than of computational abilities. Each week we will read one important article developing an applied model or models. The goal is for you to carefully read the paper, work through the game theory, and critique it or refine it as appropriate. Each primary reading will be accompanied by suggested references useful in learning the game theory and solution concepts utilized by the reading for that week.

Ideally, you will do the following before each meeting:

1. Read the paper(s).
2. Work through the model, i.e., walk through each major step in the proofs of the important propositions, understand the reasons for the simplifications and modeling choices made by the author(s), replicate the model on paper on your own from scratch.
3. Work on some potential extensions of the model, e.g., add a new player, convert the action-space from discrete to continuous or vice-versa, add another stage of play to a finite game or make a finite game infinite, investigat other candidate equilibria using the paper's solution concept or a refinement or a looser solution concept, switch the order of moves of the players, etc.
4. Identify the major limitations or flaws in the model as game theory, derived from your work on (3) above.
5. Identify the major limitations of flaws in the model as an application to the specific political context used in the article. For example, what is obvious, and what is counterintuitive? What is the model's contribution? How plausible is the model in this context?
6. Propose alternative political contexts for which this model provides some useful insight. What IR situations could be modeled along the same lines? Creativity here is a plus—many good papers started with a model derived in economics, yet in search of a political application.
7. Generate a list of potential empirical tests of the paper's model. What are the key testable propositions? How would you measure the central parameters in the comparative statics? What kind of data, i.e., what realm of interactions, would be most suitable to test the model?

I unfortunately cannot commit to doing the reading this intensively every week, so you should come prepared to do as much of the above as possible, and teach it to me, so to speak, rather than the reverse. Of course, I remain available for consultation about specific game theoretic problems.

• Thomas C. Schelling, "What is Game Theory?", in Thomas C. Schelling, Choice and Consequence: Perspectives of an Errant Economist (Cambridge: Harvard University Press, 1984), 213-242.
• Ariel Rubinstein, "Comments on the Interpretation of Game Theory," Econometrica 59:4 (July 1991), 909-924.
• David M. Kreps, Game Theory and Economic Modelling (New York: Oxford University Press, 1990), 91-132.

• David Austen-Smith and John R. Wright, "Competitive Lobbying for a Legislator's Vote," Social Choice and Welfare 9 (1992), 229-257.
• David Austen-Smith and John R. Wright, "Counteractive Lobbying," American Journal of Political Science 38:1 (February 1994), 25-44.
• Frank R. Baumgartner and Beth L. Leech, "The Multiple Ambiguities of ‘Counteractive Lobbying,’" American Journal of Political Science 40:2 (May 1996), 521-542.
• David Austen-Smith and John R. Wright, "Theory and Evidence for Counteractive Lobbying," American Journal of Political Science 40:2 (May 1996), 543-564.
• Frank R. Baumgartner and Beth L. Leech, "Good Theories Deserve Good Data," American Journal of Political Science 40:2 (May 1996), 565-569.

Sept 12: Signaling.

• Jeffrey S. Banks, "Monopoly Agenda Control and Asymmetric Information," Quarterly Journal of Economics 105:2 (May 1990), 445-64.

Sept 19: Bargaining I. Perfect and complete information.

• Ariel Rubinstein, "Perfect Equilibrium in a Bargaining Model," Econometrica 50:1 (Jan 1982), 97-110.
• For an easier proof, see Martin J. Osborne and Ariel Rubinstein, Bargaining and Markets (New York: Academic Press, 1990), 44-49.

Sept 26: Bargaining II. Incomplete information.

• Ariel Rubinstein, "A Bargaining Model with Incomplete Information about Time Preferences," Econometrica 53:5 (September 1985), 1151-1172.
• Anat R. Admati and Motty Perry, "Strategic Delay in Bargaining," Review of Economic Studies 54 (1987) 345-364.
• Martin J. Osborne and Ariel Rubinstein, Bargaining and Markets (New York: Academic Press, 1990), 91-120.

Oct 3: Deterrence I.

• Barry Nalebuff, "Rational Deterrence in an Imperfect World," World Politics 43:3 (April 1991), 313-335.

Oct 10: Deterrence II.

• Robert Powell, "Nuclear Brinkmanship with Two-Sided Incomplete Information," American Political Science Review 82 (March 1988), 155-178.

Oct 17: Deterrence III.

• James D. Fearon, "Domestic Political Audiences and the Escalation of International Disputes," American Political Science Review 88:3 (September 1994), 577-592.

Oct 24: Costless signaling.

• Vincent P. Crawford and Joel Sobel, "Strategic Information Transmission," Econometrica 50:6 (November 1982), 1431-1451.
• Steven A. Matthews, "Veto Threats: Rhetoric in a Bargaining Game," Quarterly Journal of Economics 104:2 (May 1989), 347-369.
• For help, see David Austen-Smith, "Strategic Models of Talk in Political Decision Making," International Political Science Review 13:1 (1992), 45-58.

Oct 31: Overlapping generations.

• Daniel Diermeier, "Commitment, Deference, and Legislative Institutions," American Political Science Review 89:2 (June 1995), 344-355.

Nov 7: Alliances as signals.

• James D. Morrow, "Alliances, Credibility, and Peacetime Costs," Journal of Conflict Resolution 38:2 (June 1994), 270-297.

Nov 14: Other foreign policy signaling means.

• James D. Fearon, "Signaling Foreign Policy Interests: Tying Hands versus Sinking Costs," Journal of Conflict Resolution 41:1 (February 1997), 68-90.

Nov 21: Guns/butter choices.

• Robert Powell, "Guns, Butter, and Anarchy," American Political Science Review 87:1 (March 1993), 115-132.

Nov 28: Thanksgiving Recess

Dec 5: Shifting distribution of power and war.

• Robert Powell, "Uncertainty, Shifting Power, and Appeasement," American Political Science Review 90:4 (December 1996), 749-764.

1. Ken Binmore, Fun and Games: A Text on Game Theory (Lexington, MA: DC Heath, 1992).
2. Jeffrey S. Banks, Signaling Games in Political Science (New York: Harwood Academic Publishers, 1991).
3. David M. Kreps, A Course on Microeconomic Theory (Princeton: Princeton University Press, 1990).
4. Drew Fudenberg and Jean Tirole, Game Theory (Cambridge: MIT Press, 1991).
5. David M. Kreps, "Out-of Equilibrium Beliefs and Out-of-Equilibrium Behavior," in Frank Hahn, ed., The Economics of Missing Markets, Information, and Games (New York: Oxford University Press, 1989), 7-45.