Political Game Theory



Course Description

In our everyday life we often meet the problem how individual and collective interests are in conflict. For example, when we take a drive to a traffic jam in rush hours, and thus we cause a waste of time to the others than that of our own gain. When we decide how to behave, we take into account how other players behave, not only because we care about other people but because it affects what we get out of the interaction. Game theory is a systematic study of this strategic interaction. This course is an introduction to game theory, the study of strategic behaviour among parties having opposed, mixed or similar interests. It presents the basic concepts and analytical tools of elementary game theory in a way that allows the student to apply them in real life situations. Strategic interactions are present everywhere, in computer science, economics, politics, law, and at the end of the day we don’t make decisions in a vacuum, we live in society. The goal of the course is to give an insight into the formal ways of thinking about social mechanisms and interactions. At the end of the course 

There are no formal prerequisites for the course, but some aptitude for logical reasoning and basic maths are recommended.


Outline

Below, I list the main topics to be covered during the semester. 

I. Game Theory as a method to explore social situations

II. Games and Decisions

III. How to Solve Games?

***  Midterm Exam ***

IV. Conflicts

V. Coordination Mechanisms

VI. Cooperative Games

VII. Negotiations



Educational Resources


Methodology  József Zoltán Málik: Political Game Theory. Part I: Methodology. Budapest: ELTE, 2013. (in pdf version)


Applications  József Zoltán Málik: Political Game Theory. Part II: Games and Society. Budapest: ELTE, 2014. (in pdf version)
Online Game Problem-Solver: click here.

Assessment


Final Writing Examination

Due time: 21, May, 2017.


Remark:
“Formalize the situation as a well-defined game” means in each case below that
give exactly the players, the pure strategies, specify and display the game with a payoff matrix (or a game tree, or a Schelling diagram). And “investigate it from a strategic point of view” means that determine the equilibrium/equilibria of the game and interpret it as relating technical instrument explaining the situation.

1.  To click here, you can watch footage about the D-Day in 1944. Formalize the situation as a well-defined, zero-sum game, and investigate it from a strategic point of view. What was the role of bluff used by the allies?

2.  There is a debating over two distinct proposals (A and B) in the U.S. The majority of Congress likes proposal A, the President likes B. The proposals are actually not mutually exclusive, and so either or both or neither may become law. However, there are known preference profiles of the two sides, which are as follows:

     President: Only B becomes law > Both are accepted > Status quo prevails > Only A becomes law;

     Congress: Only A becomes law > Both are accepted > status quo prevails > Only B becomes law.      

First Congress decides whether to pass a bill and whether it contains A or B or both. Then the President decides whether to sign or veto the bill, and Congress does not have enough votes to override a veto.

a.) Draw the game tree for this game, and find the equilibrium using backward induction.

b.) Now suppose the president gets an extra power of a line-item veto, meaning that if Congress passes a bill containing both A and B, the president may choose not only to sign or veto the bill as a whole, but also to veto just one of the two items. Draw the new game tree, and find the equilibrium again.

c.) Explain intuitively why there is a difference between the two equilibria arisen.     

3.   Hungary’s healthcare system is basically state-run, and there is an obligatory social insurance system, and there is an obligatory social insurance system (for additional info in brief, click this link). However, there is a very particular case of ”gratuity” called as “gratitude money” in the country, which means a highly expected tip of state-employed physicians from patients in healthcare system, especially in hospitals. Though it is illegal now, and the social insurance actually covers all the cost of the treatment to healthcare institutions for which physicians work, every patient even now feels almost to be obligatory to pay additional money immediately to medical attendants in cash. That is to say, patients consider gratitude money as a "personal price" of their treatment (e.g. tonsil or appendices operations). All patients pay as much as they think they have to or they simply can, with hoping that if they pay more, they get better and quicker care from their doctor. This mechanism installed in the communist Hungary where communist leaders thought gratitude money could be incentive for physicians: the better they were (the more reputation they had), the more money they made thanks to their patients. Which coordination mechanism can be associated with “gratitude money”? What is the trouble with this mechanism from the viewpoint of doctors, patients, and the country?

4.  In this article the academic author makes an attempt to explain Donald Trump’s extreme, provocative behaviour in the presidential race by using game theory.

a)  What are the main elements of Trump’s strategies used?

b)  The author claims that Trump actually plays a game of chicken with their opponents. Formulate this situation as a two-person, non-constant-sum game.

  5.  Pick up an arbitrary historical, economic, legal or political event or issue. First describe the case, and then try to formalize the situation as a well-defined game, and investigate it from a strategic point of view.





This course is a part of the ERASMUS+ Program at Faculty of Law,
Eotvos Lorand University, Budapest
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