Economic Applications of Game Theory
Course facts
- Payment: Free, no certificate
- Credits: Non Credit
- Learning style: Self-paced, start anytime
- Resources: Exams; Instructor Insights; Lecture Notes; Lecture Videos; Problem Sets
MIT OpenCourseWare details
- As taught in: Fall 2025
- Department: Economics
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Game theory for economics: dominance, Nash equilibrium, backward induction, repeated games, auctions, signaling, and cheap talk, in recorded lectures.
Game theory is the mathematical analysis of strategic interaction, where one person’s best decision depends on what others decide: chess and poker, but also cartels, political competition, voting, bargaining, auctions and evolution. This course introduces its fundamental tools in recorded lectures, including dominance, Nash equilibrium, backward induction, repeated and Bayesian games, signaling and cheap talk, with economic applications throughout.
What You Will Achieve
- Represent strategic situations as games and find dominant strategies
- Solve for Nash and subgame-perfect equilibria using backward induction
- Analyze repeated games, the folk theorem, and implicit cartels
- Apply Bayesian games to auctions, signaling, and bargaining with incomplete information
Program Overview
Static Games and Equilibrium
Decisions, strategies and the core solution concepts.
- Individual decision-making and the representation of games
- Dominance and rationalizability
- Nash equilibrium and imperfect competition
- Zero-sum games
Dynamic and Repeated Games
Strategy over time and the value of reputation.
- Backward induction and negotiation
- Subgame-perfect equilibrium and bargaining
- Finitely and infinitely repeated games
- The folk theorem and implicit cartels
Games with Incomplete Information
Strategy when players know different things.
- Bayesian games and Bayesian Nash equilibrium
- Auctions, revenue equivalence, and ad auctions
- Perfect Bayesian equilibrium and signaling
- Cheap talk and common knowledge
Course Completion
Job Outlook
Game theory is used in economics, auction and market design, competition policy, political science, negotiation and the design of pricing and online advertising systems.
Good for: Learners who want a rigorous, application-rich first course in game theory, taught through in-class games.
Keep in mind: Solutions to the problem sets and exams are not published, so you have to check your own answers against the lecture notes and videos.
Bottom line: A recorded game theory course that keeps economic applications in view, ending on auctions, signaling and cheap talk.
Frequently Asked Questions
Which economic applications does the course cover?
Imperfect competition, negotiation and bargaining, implicit cartels in repeated games, auctions and revenue equivalence, ad auctions, and signaling, among others.
Are solutions available?
No. The problem sets and the exams, a 2025 midterm and a 2024 final, are published without solutions, so they are best used for self-testing.
How were the problem sets used in class?
They were assigned but not collected; in-class quizzes on the problem set material took their place, because generative AI could solve most of the questions.
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