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JAVIER MORENO ZACARÉS EUPHORIA OF THE RENTIER? Notwithstanding the cyclical downturns and occasional depressions, it is customary to speak of capitalist development as a dynamic of self-expanding growth. Since the 1970s, however, stagnation has set in on a global scale amid falling profitability in the sphere of commodity production. The relocation of the world’s manufacturing base to low-wage economies has failed to offset this process—on the contrary, late industrializers have compressed the productivity gains of their predecessors into ever-shorter growth cycles, recreating their problems in an accelerated fashion. In the meantime, capital has turned to speculative ventures, promising better returns. The result has been a pattern of weak growth sustained by financial bubbles, leaving a trail of destructive crashes and jobless recoveries in the build-up to the Great Recession. In the decade since 2009, the central banks of the rich world have blanketed their anaemic economies with m...

This version: 8. March 2021 University of St. Gallen Dennis Gärtner Course Nr.: 4,200 | 4,202 Microeconomics III Supplementary Notes for: 2.1 Static Games, Complete Information This part deals with static games. These are easiest to think of as games in which players choose their actions simultaneously. As we will more formally see later on, what is crucial for our purpose is that no player has a chance to react to anything that some other player does. Examples of static (bimatrix) games (slides 4-9). These slides give you some examples of games be-tween two players where players simultaneously pick one of two actions – some of which will surely be familiar (such as the timeless classic, the prisoners’ dilemma). The examples are meant to give you an idea of the many flavors that games might have even in this small class (2 players, 2 actions each), specifically regarding elements of “conflict”, “coordination” and “efficiency”. Beyond that, a crucial point to realize here is that, as re...

This version: 8. March 2021 University of St. Gallen Dennis Gärtner Course Nr.: 4,200 | 4,202 Microeconomics III Supplementary Notes for: 2.0 Game Theory, Introduction Intro game. I usually start this lecture with an introductory classroom game, which you will find in a separate upload. The upload contains the game itself (on the first slide), the (equilibrium) analysis, and last year’s results. I recommend that at this point, you look only at the game itself (the first slide), that you really try to put yourself into the situation (or even try playing it with your quarantine-mates?) and imagine how you would respond, and that you later return to the rest of the slides *after* having completed 2.0 and 2.1. At this point in the lecture, the game is only meant to alert you to the key issue in game theory: that in order to determine what an “optimal” response on your part is, you need to think about what you believe others will do. Additional motivation. I already sent you a short piece a...

This version: 8. March 2021 University of St. Gallen Dennis Gärtner Course Nr.: 4,200 | 4,202 Microeconomics III Supplementary Notes for: 2.2 Dynamic Games, Complete Information An example: Gibbons’ grenade game (4). This example is taken from Gibbons’ book, pp. 55-56 and is meant to illustrate one of the central issues in dynamic games: noncredible threats. Bear in mind that the example stems from a time in which it was perhaps more common for terrorists etc. to not want to kill themselves, hence the payoff of −∞ for both when the grenade is blown. I’ve elected to keep it because this reminds of the fact that we are still dealing with games of complete information, meaning that every player knows every other player’s preferences over outcomes. Specifically, in the example at hand, the assumption is that player 1 knows that player 2’s least preferred outcome is to blow the grenade (with or without money). By the way, if, like me, you find the game a bit violent – think of the grenade a...