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 provides the reader with some basic concepts from noncooperative theory, and then goes on to explore the strengths, weaknesses, and future of the theory as a tool of economic modelling and analysis. The central theses are that noncooperative game theory has been a remarkably popular tool in economics over the (...) past decade because it allows analysts to capture essential features of dynamic competition and competition where some parties have proprietary information. The theory is weakest in providing a sense of when it - and equilibrium analysis in particular - can be applied and what to do when equilibrium analysis is inappropriate. Many of these weaknesses can be addressed by the consideration of individuals who are boundedly rational and learn imperfectly from the past. Written in a non-technical style and working by analogy, the book, first given as part of the Clarendon Lectures in Economics, is readily accessible to a broad audience and will be of interest to economists and students alike. Knowledge of game theory is not required as the concepts are developed as the book progresses. (shrink)

Provides a rigorous treatment of some of the basic tools of economic modeling and reasoning, along with an assessment of the strengths and weaknesses of these tools Complements standard texts Covers choice, preference, and utility; ...

This three volume set contains papers presented at the Seventh World Congress of the Econometric Society. The first volume contains three papers presented at the Seventh World Congress of the Econometric Society which summarize and interpret key recent developments and discuss current and future directions in a wide range of topics in economics and econometrics. They cover both theory and applications. Authored by leading specialists in their fields, these volumes provide a unique survey of progress in the discipline. The second (...) volume comprising three papers which examine the latest developments in economic theory, applied economics and econometrics presented at the Seventh World Congress of the Econometric Society in Tokyo in August 1995. The topics were carefully selected to represent the most active fields in the discipline over the past five years. Written by the leading authorities in their fields, each paper provides a unique survey of the current state of knowledge in economics. Designed to make the material accessible to a general audience of economists, these volumes should be helpful to anyone with a good undergraduate training in economics who wishes to follow new ideas and tendencies in the subject. The third of three volumes contains papers presented at the Seventh World Congress of the Econometric Society. The papers summarize and interpret key recent developments and discuss current and future directions in a wide range of topics in economics and econometrics. They cover both theory and applications. Authored by leading specialists in their fields, these volumes provide a unique survey of progress in the discipline. (shrink)

Provides the reader who has not studied game theory a brief and non‐technical introduction to the main categories of models and forms of analysis: strategic‐ form games; extensive‐form games; dominance; and Nash equilibrium.

Argues that many of the weaknesses of game theory arise from weaknesses in how economists model individual behaviour: with hyper‐rational and forward‐looking, farsighted individuals. Progress is likely to be made by re‐examining our models of behaviour, incorporating bounds to individual rationality and modelling individuals who are more retrospective, learning adaptively from the past.

There are three stages of thought in the development of the normative theory of trade policy. This book expounds the third stage, where the link between the case for free trade and for laissez faire is broken.

The weaknesses of game theory for purposes of economic modelling are discussed: the theory requires that protocols for interaction are precise. The theory often provides many equilibria and no way to choose among them. Despite work on so‐called refinements of equilibrium, the theory fails to help us understand how individuals react to counter‐theoreticals in dynamic interactions. Equilibria are often very delicate, depending on states of nature that have very small probability a priori. The theory fails to explain how the rules (...) of a particular game got to be what they are. (shrink)

Argues that, for purposes of this book, game theory should be judged by the substantive insights it has provided into real economic situations.

Illustrates some of the successes of non‐cooperative game theory in economics. Specifically, it discusses how non‐cooperative game theory has helped economists to understand dynamic competition, credibility and reputation, cooperation based on reciprocity and the threat of punishment, and interactions in which parties hold private information, including information about their own basic motivations.