Provide an original analysis of a strategic situation (1500 words), targeted at an audience that has already studied elementary game theory at the level of university modules courses.

Provide an original analysis of a strategic situation, targeted at an audience that has already studied elementary game theory at the level of a university module. The situation you examine may come from history, current affairs, your own personal experience, or some other source; but it is important that your subject matter be original. The situation can be hypothetical, but realism is valued and any invented scenario should be compelling.

First, describe the relevant features of the situation and translate them into the form of a game. In particular, think about the following questions:

• Who are the players in your game? Is there a role for “Nature”?

• What actions are available to the players, and in what sequence are these actions

  taken? What information do the players have when they make their choices?

• What are the possible outcomes of the situation, and how do the players rank them? If relevant, what are the players’ risk preferences over the outcomes?

  You may need to simplify the interaction or impose assumptions in order to arrive at a tractable model, but you should try to preserve the strategic essence of the situation.

  Next, use any applicable game-theoretic tools to analyse your model, to uncover the strategic dynamics of the situation, and to draw conclusions about the behaviour and outcomes that might be expected. Here the goal is to demonstrate your mastery of the concepts and techniques studied in the module, so you should select an application that enables you to be ambitious—though without adding complications for their own sake. Specifically, you may wish to consider the following questions:

• Can your model be enhanced by incorporating imperfect information or repeated interaction, and if so what further understanding of the situation does this yield?

• Are you able to include one or more parameters (controlling preferences, beliefs, chance events, technologies, costs, etc.) and carry out comparative statics analysis?

• Can your conclusions be sharpened by requiring subgame perfection or applying iterative dominance?

  Keep in mind that your target audience is assumed to be familiar with elementary game theory, so you do not need to define standard terms or explain familiar techniques from first principles.

  Your total mark on Task II will be made up of three components:

1. Analysis (20 marks). [See Task I above.]

2. Exposition (20 marks). [See Task I above.]

3. Originality (20 marks). Choose an application that is somehow novel, insightful, unexpected, or ingenious. Avoid those that are familiar, obvious, or pedestrian.