Decision makers face two types of uncertainty: uncertainty about the state of nature (how much oil is in an oilfield) and uncertainty about the strategic behaviour of other decision makers (how many oil wells they will drill). This unit of study focuses on strategic uncertainty and the uses decision makers can make of the concepts of game theory to guide their decisions. Game theory studies situations where a) agents have conflicts of interests and b) agents can take actions that directly affect their payoffs and the payoffs of others. A very broad range of applications from business and economics fit the above description and therefore can be studied by the methods of game theory. Applications include, firm pricing and output decisions, market entry and exit, hold-up, collusion, bargaining, auctions, and signalling.
1x1.5hr Mid semester test (40%), 1x2hr Final exam (50%), Tutorial assignments equivalent to 1000wds (10%),
ECON6001 or ECOF6080 or ECON6701