Advanced Microeconomic Theory Fall 2013 Koc ¸ University, Alp Atakan Summary and Objectives.

This class covers topics that fall under the heading of dynamic game theory. Although we will also study dynamic games with complete information, there will be disproportionate weight placed on dynamic games with asymmetric information and problems in which learning is paramount. More specifically, we will study topics in bargaining, dynamic bargaining and search, repeated games, games with reputation concerns, experimentation and information aggregation. Readings and lectures are organized around a twofold goal: - an in-depth study of the papers that are considered “central” to each topic. - a description of the “frontier” of each topic with a focus on open questions. We will also cover some earlier topics which are well understood because (i) they belong to the standard intellectual tool kit of an economic theorist, (ii) more importantly, they pave the way for the later topics. Grading and Lecture Style. Lectures will cover the basic foundations of the models

followed by the discussion of many theoretical and applied papers written in that area. Depending on enrollment, each student will be required to present two or three papers during the semester, and each presentation will be an hour long. I will be presenting about one half of the total number of lectures. There will be no problem sets or exams, and grades will be based on the presentations, contribution during the class discussions, and a short paper due during the finals week of the semester. Topics, readings, and papers 1.1. Bargaining. Please read, Bargaining and Markets, Osborne and Rubinstein (1990),

Chapters 2 - 7 and Game Theory: Analysis of Conflict, Myerson (1991), Chapter 8. i. Axiomatic bargaining and Nash’s Solution: (1) “The Bargaining Problem,“ Nash (1950)* (2) “Two-person cooperative games,” Nash (1953) ii. Alternating-offers bargaining (1) “Perfect equilibrium in a bargaining model,” Rubinstein (1982)* (2) “Involuntary unemployment as a perfect equilibrium in a bargaining model,” Shaked and Sutton (1984) (3) “Compromise is Key to Repeated Bargaining,” Dutta and Takahashi (2013) * 1

Chapters 15-18.” Gossner et al.” Fudenberg and Levine (1989) (2) “Public trust and government betrayal.2. Imperfect monitoring.” Abreu and Pearce (2007) 2 . (2001)* (4) “Search-Theoretic Models of the Labor Market: A Survey. (2004) (2) “Reputation in Long-run Relationships. Reputation in infinitely repeated games under perfect monitoring (1) “Reputation and equilibrium selection in games with a patient player. (2005) 1. Mailath and Samuelson (2006).iii. The chair-store paradox and reputation in finitely repeated games ii. Bargaining in markets with random or directed search (1) “Equilibrium in a market with sequential bargaining.” Fudenberg and Levine (1992) (2) “Imperfect monitoring and impermanent reputations. i.” Rubinstein and Wolinsky (1985)* (2) “Bargaining and Reputation in Search Markets.” Phelan (2006) (3) “Reputation Acquisition in Debt Markets. Compte and Jehiel (2002) iv.” Burdett et al.” Diamond (1989) iii. Bargaining under incomplete information and reputations (1) Bargaining and Reputation Abreu and Gul (2000)* (2) On the role of outside options in bargaining with obstinate parties.” Atakan and Ekmekci (forthcoming)* (3) “Pricing and Matching with Frictions. Please read Repeated games and reputations: long-run relationships. (2011) iv.” Atakan and Ekmekci (2012) (3) “A two-sided reputation result with long-run players” Atakan and Ekmekci (2013) (4) “Bargaining. Reputation in the long run (1) Imperfect monitoring and impermanent reputations. and reputation (1) “Maintaining a reputation when strategies are imperfectly observed. the product-choice game.” Rogerson et al. Repeated games and reputations. Cripps et al. and Equilibrium Selection in Repeated Games with Contracts. Part IV. Reputation.

” American Economic Review. 24. Wright (2001): “Pricing and Matching with Frictions.” Feddersen and Pesendorfer (1996) References Abreu. Information aggregation in elections (1) “Voting Behavior and Information Aggregation in Elections With Private Information.3. Pesendorfer (1997): “Voting Behavior and Information Aggregation in Elections With Private Information. Gul (2000): “Bargaining and Reputation. 1477–1517.” Pesendorfer and Swinkels (2000) (3) “Auction. i. P. 1029–1058. Shi.” Econometrica. ——— (forthcoming): “Bargaining and Reputation in Search Markets. and L. 451–480. Samuelson (2004): “Imperfect monitoring and impermanent reputations. and R.” Journal of Political Economy. Dutta.” The Annals of Mathematical Statistics.” Pesendorfer and Swink (1997) (2) “Efficiency and information aggregation in auctions. 653–710. 407–432. and W. Reputation. pp.” Blackwell (1953) ii. Basics (1) “Equivalent Comparisons of Experiments. Mailath.” Review of Economic Studies.. Jehiel (2002): “On the role of outside options in bargaining with obstinate parties. Burdett. Ekmekci (2012): “Reputation in Long-run Relationships.” Feddersen and Pesendorfer (1997) (2) “The Swing Voters Curse. and the Failure of Information Aggregation. (1953): “Equivalent Comparisons of Experiments. Actions. 1060–1085. and F. D. and Equilibrium Selection in Repeated Games with Contracts. K. (1989): “Reputation Acquisition in Debt Markets. Takahashi (2013): “Compromise is Key to Repeated Bargaining. D. Diamond. Compte. experimentation.” Econometrica. D.” Atakan and Ekmekci (Forthcoming) iii. D. 109. Actions. 79. Feddersen. and S. Value of information. 376–392.” Journal of Economic Theory. Pearce (2007): “Bargaining. K. O. Abreu. 75. and the Failure of Information Aggregation. T. 72. 65. and D..” Econometrica. A. 68. G.” Econometrica. 828–862. 97.” Econometrica. and information aggregation. M. and P. ——— (2013): “A two-sided reputation result with long-run players. and M. 85–117.1. Atakan. 148. ——— (Forthcoming): “Auction.” The Journal of Political Economy. 3 . 70. 265–272. Information aggregation in auctions (1) “The losers curse and information aggregation in common value auctions. S.” Review of Economic Studies. Cripps.” . Blackwell.

97–109. and R. A. Gossner. 18. C. Sutton (1984): “Involuntary unemployment as a perfect equilibrium in a bargaining model. 27–43. D. and D. 130. 155–162. M. Swinkels (1997): “The loser’s curse and information aggregation in common value auctions. 86. and J. 1351–1364. W. 408–424. and A. ——— (1953): “Two-person cooperative games. forthcoming. Samuelson (2006): Repeated games and reputations: long-run relationships.Feddersen.” Econometrica. G.. 1133–1150. Pesendorfer.” American Economic Review. 53. A. O. (1950): “The Bargaining Problem. A. J.” Econometrica.” Econometrica. 128–140.” The Review of Economic Studies. R.” Econometrica.” Econometrica. Pesendorfer (1996): “The Swing Voter’s Curse. 1247–1281. J. T. R. and J. and W.” Journal of Economic Theory.” American Economic Review. M. R.” Econometrica.” Journal of Economic Literature. and A. Wright (2005): “Search-Theoretic Models of the Labor Market: A Survey. 21. XLIII. 499– 525. 52.” Econometrica. Fudenberg. 759–778.. ——— (2000): “Efficiency and information aggregation in auctions. Phelan. and A. Wilson (2011): “Imperfect monitoring and impermanent reputations. and L. ——— (1992): “Maintaining a reputation when strategies are imperfectly observed. (1991): Game Theory: Analysis of Conflict. Rubinstein. Wolinsky (1985): “Equilibrium in a market with sequential bargaining.” Journal of Economic Theory. 4 . Rogerson. 57. 90. Mailath. Ekmekci. Myerson. (2006): “Public trust and government betrayal. Nash. Osborne. Levine (1989): “Reputation and equilibrium selection in games with a patient player. 959–988. Shaked. (1982): “Perfect equilibrium in a bargaining model. 65. 561–579. Rubinstein. Rubinstein (1990): Bargaining and Markets. Shimer.