Experimental Economics and Psychology. Part III Debrah Meloso A.y. 2012-2013 1 Introduction These lecture notes are dedicated to Game Theory, and are complements to your book chapter. The reason why Game Theory is covered in this course is because it has proven one of the most useful tools to ask about the potential outcomes from organizing interactions in one way or the other. It has, moreover, told us a lot about the foundations of societies as we know them nowadays, how we can explain certain characteristics shared across cultures or justify that other characteristics are limited to only a few. A closely-related reason is that much of Experimental Economics studies games, asking, among others, the following questions: 1. Are individuals capable of sharp strategic thinking? Are they as sharp and selfish as the theory of games assumes? 2. Do games played in the laboratory deliver the prediction of the theory? Under what circumstances yes or no? 3. If the theory predicts several plausible outcomes, which one will be selected by subjects in the laboratory? 4. Can people learn to play games? How? How much feedback must they receive in order to learn? It takes a long detour into the theory that studies games for you to fully understand the meaning of the above questions. We will start with the representation of games to move on to how games are solved. Examples will get more subtle as the notes progress. We start with the game you played in class, the centipede game. Example ...
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