Contents
Preface xj
1 Static Games of Complete Information 1
1.1 Basic Theory: Normal-Form Games and Nash
Equilibrium 2
1.1. A Normal-Form Representation of Games . . . . 2
1.1.B Iterated Elimination of Strictly Dominated
Strategies 4
1.1 .C Motivation and Definition of Nash Equilibrium 8
1.2 Applications 14
1.2. A Cournot Model of Duopoly 14
1.2.B Bertrand Model of Duopoly 21
1.2.C Final-Offer Arbitration 22
1.2.D The Problem of the Commons 27
1.3 Advanced Theory: Mixed Strategies and
Existence of Equilibrium 29
1.3.A Mixed Strategies 29
1.3.B Existence of Nash Equilibrium 33
1.4 Further Reading 48
1.5 Problems 48
1.6 References 51
2 Dynamic Games of Complete Information 55
2.1 Dynamic Games of Complete and Perfect
Information 57
2.1.A Theory: Backwards Induction 57
2.1.B Stackelberg Model of Duopoly 61
2.1.C Wages and Employment in a Unionized Firm 64
2.1.D Sequential Bargaining 68
2.2 Two-Stage Games of Complete but Imperfect
Information ^