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Microeconomics III

Code 14796
Year 3
Semester S1
ECTS Credits 6
Workload T(30H)/TP(30H)
Scientific area Economics
Entry requirements Nothing to report
Mode of delivery The teaching method is face-to-face, with lectures both theoretical and practical. Accordingly, students are invited to interact with the teacher and with colleagues in the resolution of the proposed exercises. The degree of commitment to these exercises will be taken into consideration in the final evaluation.
Work placements Not applicable
Learning outcomes This curricular unit (CU) is intended to:
- Strengthen the knowledge from the microeconomics courses;
- Acquaint the students with the tools of game theory, illustrating the theoretical concepts with microeconomic applications (case studies), always on the complete information usage;
- Formulate theoretical frameworks that capture the fundamental elements of the strategic interaction among microeconomic agents;
- Understanding how the surplus is distributed from the negotiation processes among firms.
The student acquires skills to analyze interactions, cooperative or competitive, where economic agents know that the result of their actions is dependent on its own, but also it is dependent of the actions taken by other agents and the timing of the decision. At the end of the CU the student should be able to explain how the interaction between firms causes stable equilibriums.
Syllabus 1. Basic concepts of a game
1.1 – Types of games
1.2 – Strategic and extensive-forms games
1.3 – Equilibrium concepts
1.4 – Cooperative and non-cooperative game theory
2. Static games with complete information
2.1- Dominant and dominated strategies
2.2- Constant and null-sum games
2.3- Pure and mixed strategies
2.4- Iterated elimination of dominated strategies
2.5- Nash Equilibrium: Motivation and definition
3. Applications
3.1 – The Cournot’s duopoly game
3.2 – Characteristics of Nash-Cournot equilibrium
3.3 – The Bertrand’s duopoly game
3.4 – The Hotelling’s location game
4. Dynamic games with complete information
4.1- Nash equilibrium and Backward Induction
4.2- Credibility of the threats
4.3- Simultaneous movements, subgames and subgame-perfect equilibrium
5. Applications
5.1- The Stackelberg’s duopoly model
5.2- Repeated games: finite and infinite time
5.2- Auctions: English, Dutch and one-shot
5.3- Negotiation with and without impatience
Main Bibliography Bierman, H. Scott and L. Fernandez (1998), Game Theory with Economic Applications, Addison - Wesley, 2nd ed.
Binmore, K. (1999), Jeux et Théorie des Jeux, De Boeck Université, Paris.
Carmichael, Fiona (2005), A Guide to Game Theory, Prentice Hall – Financial Times.
Chiang, A. (1983) Matemática para Economistas, São Paulo, Mcgraw-Hill.
Dixit, Avinash, Susan Skeath and David Reiley (2015), Games of Strategy, 4nd ed., New York: W.W. Norton & Company.
Fiani, R. (2006), Teoria dos Jogos, Elsevier Editora, Lda, 2ª edição
Gibbons, R. (1992), A Primer in Game Theory, Harvester Wheatsheaf, Hampshire.
Marques, A.; Macedo, D.; Pereira, D.; Leal, P.; Neves, S. (2018) Economia Industrial: Teoria e Prática – abordagem estratégica com Teoria dos jogos, Almedina, Coimbra
Pindyck, R. and Rubinfeld. D. (2018), Microeconomics, Prentice-Hall, 9th ed., New Jersey.
Rasmusen, E. (2006), Games and Information: An Introduction to Game Theory, Blackwell Publishers, 4th edition.
Language Portuguese. Tutorial support is available in English.
Last updated on: 2023-01-24

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