Game Theory and Economic Modelling (Electronic book text)

This book offers an introduction to game theory, for academics and undergraduates interested in economic theory, but with no prior knowledge of game theory. It is written in non-technical language and concepts are developed as the book progresses. Game theory is currently a very popular tool of analysis, and this book looks at reasons why this is so. This is the first title to be published in the Clarendon Lectures in Economics series (see overleaf). The Clarendon Lectures in Economics: These lectures were established in 1987. They consist of coherent sets of three to four lectures given by distinguished economists which are accessible to advanced undergraduates but also of interest to academics. Subjects vary from high theory to policy-oriented topics. These lectures were established in 1987. They consist of coherent sets of three to four lectures given by distinguished economists which are accessible to advanced undergraduates but also of interest to academics. Subjects vary from high theory and applications of theory to policy-oriented topics. Previous lecturers include Professors J. M. Grandmont, Michael Bruno, and Kenneth Arrow. Over the past two decades, academic economics has undergone a mild revolution in methodology. The language, concepts and techniques of noncooperative game theory have become central to the discipline. This book looks at why game theory has become such a popular method of analysis. It examines the deficiencies in this approach and goes on to consider whether its popularity will fade or whether it will remain an important tool for economists. -;Introduction; The standard; Basic notions of noncooperative game theory: Strategic form games; Extensive form games; Extensive and strategic form games; Dominance; Nash equilibrium; The successes of game theory: Taxonomy based on the strategic form; Dynamics and extensive form games; Incredble threats and incredible promises; Credible threats and promises: cooperation and reputation; The importance of what players know about others; The problems of game theory: Bilateral bargaining and precise protocols; Too many equilibria and no way to choose; choosing among equilibria with refinements; The rules of the game; Bounded rationality and retrospection