Economics 331: Game Theory and Social Choice
Professor: Douglas Nelson
Office: 108 Tilton Hall (Murphy Institute)
Very broadly speaking, "public choice" refers to the application of the tools of modern economic theory to the study of politics. More specifically, since one of the fundamental attributes of political competition is interdependent decision-making, we will be primarily interested in the application of game theory to the study of politics. It is useful to think of game theory as a generalization of the theory of choice, as studied in standard economics courses, to strategic situations. That is, environments in which the behavior of others is an essential input into one's own decision making. Game theory owes much of its early development to the nuclear strategic concerns of the cold war. We will be primarily concerned with its application to domestic politics: electoral competition, group formation and provision of public goods, and legislative politics.
Although we will briefly review non-strategic choice theory at the beginning of the term, it is assumed that all students have taken a course on intermediate microeconomics (i.e. ECON 301).
Mathematical content: This course deals in formal argument. We will use extensively the mathematical tools of logic, algebra and geometry, and occasionally simple calculus.
Your performance in this course will be evaluated on the basis of three non-cumulative examinations and several homework assignments that will be worth, collectively, 100 points. Your final grade will be determined by your percentage of the 400 available points. In addition, all students are expected to have read the assigned material prior to its discussion in class and are expected to be able to participate actively in classroom discussion.
Policy on examinations. Unless you have a standard university accepted excuse for missing an exam (e.g. health with standard university form), you must take the exams at their scheduled time. The final examination will only be given on the scheduled date: Tuesday, 20 Dec 1994, 8:00a-12:00a (there will be no exceptions so do not make travel plans that conflict with this).
The primary text for this course will be
Peter Ordeshook (1986). Game Theory and Political Theory: An Introduction. Cambridge: Cambridge University Press. [Ordeshook]
In addition to the primary text, there will be a packet of supplementary readings available at the university bookstore. Starred ("*") readings are required, others are optional.
Some Useful References. Much of our work this semester assumes a basic understanding the theory of rational choice. Although we will briefly review this material in the first part of the semester, you may want to pursue the review in more detail. A couple of excellent sources are:
-Varian (1990). Intermediate Microeconomics: A Modern Approach. New York: Norton. Chapters 3-5 provide an excellent discussion of the basic theory of choice at a relatively elementary level. Chapter 26 provides a discussion of basic game theory.
-Dixit and Nalebuff (1991). Thinking Strategically. New York: Norton. This is a really fun book on the intuition of game theory by two very sophisticated users of game theory.
Syllabus: Economics 331
Game Theory and Social Choice
Topic 1: Introduction and Course Overview
Topic 2: Review of Non-Strategic, Individual Choice
*Ordeshook, Chapter 1
Topic 3: Review of Non-Strategic, Collective Choice
*Ordeshook, Chapter 2
*N. Miller, B. Grofman and S. Feld (1989). "The Geometry of Majority Rule". Journal of Theoretical Politics; V.1-#4, pp. 379-406.
*W. Riker (1980). "Implications from the Disequilibrium of Majority Rule for the Study of Institutions". American Political Science Review; V.74-#?, pp. 432-446.
Topic 4: Introduction to Non-Cooperative Game Theory
*Ordeshook, Chapter 3
Topic 5: Strategic Analysis of Electoral Competition
*Ordeshook, Chapter 4
*G. Rabinowitz, P. Gurian and S. Macdonald (1984). "The Structure of Presidential Elections and the Process of Realignment, 1944-1980". American Journal of Political Science, V.28-#?, pp. 611-635.
*G. Cox (1990). "Centripetal and Centrifugal Incentives in Electoral Systems". American Journal of Political Science; V.34-#4, pp. 903-935.
*D. Wittman (1983). "Candidate Motivation: A Synthesis of Alternative Theories". American Political Science Review; V.77-#?, pp. 142-157.
*M. Hinich and M. Munger (1992). "A Spatial Theory of Ideology". Public Choice; V.4-#?, pp. 5-30.
Topic 6: Strategic Analysis of Public Good Provision
*Ordeshook, Chapter 5
-R.H. Wagner (1983). "The Theory of Games and the Problem of International Cooperation". American Political Science Review; V.77-#?, pp. 330-346.
Topic 7: Strategic Analysis of Legislative Politics--Strategic Voting, Institutions, Agendas
*Ordeshook, Chapter 6
-K. Shepsle (1979). "Institutional Arrangements and Equilibrium in Multidimensional Voting Models". AJPS; V.23-#1, pp. 27-58.
*T. Romer and H. Rosenthal (1979). "Bureaucrats versus Voters: On the Political Economy of Resource Allocation by Direct Democracy". Quarterly Journal of Economics; V.93-#?, pp. 563-587.
*J. Enelow and D. Koehler (1980). "The Amendment in Legislative Strategy: Sophisticated Voting in the US Congress". Journal of Politics; V.42-#?, pp. 398-413.
Topic 8: Congressional Structures. Sophistication and Structure-Induced Equilibrium
*J. Ferejohn (1986). "Logrolling in an Institutional Context: A Case Study of Foodstamp Legislation". in G. Wright, L. Rieselbach, and L. Dodd, eds. Congress and Policy Change. New York: Agathon Press. pp. 222-253.
*K. Shepsle and B. Weingast (1987). "The Institutional Foundations of Committee Power". American Political Science Review; V.81-#1, pp. 85-104. (Comment by K. Krehbiel and Response, APSR, 1987, V.81-#3, pp. 929-945)
*A. Denzau and R. Mackay (1983). "Gatekeeping and Monopoly Power of Committees: An Analysis of Sincere and Sophisticated Behavior". American Journal of Political Science. V27-#?, pp. 740-761.
*A. Denzau, W. Riker and K. Shepsle (1985). "Farquharson and Fenno: Sophisticated Voting and Home Style". American Political Science Review; V.79-#?, pp. 1117-1134.
Topic 9: Principals and Agents with and without Asymmetric Information
*K. Arrow (1985). "The Economics of Agency". in J. Pratt and R. Zeckhauser, eds. Principals and Agents: The Structure of Business. Cambridge: Harvard Business School Press, pp. 37-51.
*G. Miller (1977). "Bureaucratic Compliance as a Game on the Unit Square". Public Choice; V.29-#?, pp. 37-52.
*B.D. Wood (1988). "Principals, Bureaucrats, and Responsiveness in Clean Air Enforcements". American Political Science Review; V.82-#1, pp. 213-234.
*M. McCubbins, R. Noll and B. Weingast (1987). "Administrative Procedures as Instruments of Political Control". Journal of Law Economics and Organization; V3-#2, pp. 243-277.
Topic 10: Repetition, Reputation and Reciprocity
*Ordeshook, Chapter 10 (pp. 441-462 only)
*C. Lipson (1984). "International Cooperation in Economic and Security Affairs". World Politics; V.37-#1, pp. 1-23.
*J. Alt, R. Calvert and R. Humes (1988). "Reputation and Hegemonic Stability: A Game-Theoretic Analysis". American Political Science Review; V.82-#2, pp. 446-466.
Topic 11: Introduction to Cooperative Game Theory
*Ordeshook, Chapter 7
Topic 12: Coalitions and the Core
*Ordeshook, Chapter 8
Topic 13: Solution Theory
*Ordeshook, Chapter 9
Examination 3 (Final Exam)