Game Theory and Economics

by Montet, Christian; Serra, Daniel

• ISBN13: 9780333618479
• ISBN10: 0333618475
• Format: Paperback
• Copyright: 2003-12-05
• Publisher: Red Globe Pr

Summary

In recent times game theory has been applied with success to a range of issues in economics, social science and business. This new core textbook is a thorough and challenging introduction to game theory and its applications in the various fields of economics and related disciplines. It presents a comprehensive coverage of standard as well as new developments in the field, including cooperative games, evolutionary game theory and experimental games. Game Theory and Economics is an ideal course companion for students studying game theory at either undergraduate or postgraduate level. Book jacket.

Author Biography

Christian Montet and Daniel Serra are both Professors of Economics, University of Montpellier.

Table of Contents

List of Figures	p. x
Acknowledgements	p. xv
Introduction	p. xvii
Why the need for a new textbook?	p. xvii
Five distinctive features of the book	p. xix
Organization of the book and alternative course design	p. xx
Advice to the reader	p. xxiii
Notation and symbols	p. xxv
Preliminaries	p. 1
Introduction to game theory and outline of the book	p. 1
Game theory: what it is and where it comes from?	p. 1
Non-cooperative and cooperative games: the two classical frameworks	p. 2
Game theory and decision theory: what is the difference?	p. 4
Rational behaviour, information and equilibrium	p. 4
'Rationalistic' and 'evolutive' interpretations of an equilibrium	p. 6
Game theory and empiricism	p. 9
Detailed description of the book's content	p. 10
Formal representation of games	p. 13
Extensive-form games	p. 13
Strategic-form games	p. 17
Coalitional-form games	p. 22
Bibliography	p. 26
Optimal Decentralized Decisions	p. 28
Dominant strategy equilibrium	p. 29
Definition	p. 29
Existence and efficiency	p. 31
Iterated dominance and backward induction	p. 34
Iterated dominance	p. 34
Backward induction	p. 37
Safety First	p. 39
Security strategies	p. 39
Optimal security strategies in strictly competitive games	p. 42
Applications	p. 45
Voting game	p. 45
Implementation theory and public decision making	p. 49
Bibliography	p. 59
Non-Cooperative Games with Complete and Perfect Information	p. 62
Nash equilibrium: theory and early applications	p. 63
Definition and existence	p. 63
Two classical applications in industrial organization: Cournot and Bertrand duopoly models	p. 68
Justification and selection of a Nash equilibrium	p. 73
Failures of NE concept: non-existence, multiplicity, inefficiency	p. 78
Extensions: randomization and correlation	p. 80
Mixed strategy equilibrium	p. 80
Correlated equilibrium	p. 86
Repeated games	p. 91
Definition	p. 91
The folk theorem	p. 94
Sub-game perfection: refinement 1	p. 97
Sub-game perfection and backward induction	p. 97
Stackelberg equilibrium: a classical application in industrial organization	p. 100
Sub-game perfection in general games	p. 103
Applications	p. 109
Sequential games and strategic commitment	p. 109
Sequential games and hidden actions: moral hazard	p. 120
Repeated games and credible threats or promises	p. 127
Basic topological concepts: convexity, correspondences and fixed point theorems	p. 135
Bibliography	p. 137
Non-Cooperative Games with Imperfect or Incomplete Information	p. 141
Games with incomplete information: Bayesian equilibrium	p. 142
The axiomatic framework of games with complete information	p. 142
Rationalizable strategies	p. 144
The Bayesian game and Nash equilibrium	p. 146
A classical application: auctions	p. 151
Perfectness and sequentiality: refinement 2	p. 155
Perfectness	p. 156
Sequentiality	p. 161
Forward induction: refinement 3	p. 170
Forward induction and backward induction	p. 171
Formalizations of forward induction in signalling games	p. 175
Stable sets of equilibria	p. 185
Applications	p. 188
Repeated games with incomplete information: reputation effects	p. 188
Signalling games	p. 192
Bibliography	p. 203
Bargaining: from Non-Cooperative to Cooperative Games	p. 206
Strategic games of bargaining	p. 207
Indeterminacy or extreme Nash equilibria in simple two-person bargaining games with complete information	p. 208
The Rubinstein model: alternating offers in finite and infinite horizon bargaining games	p. 211
'Outside option' games	p. 218
Non-cooperative theories of bargaining under incomplete information	p. 222
Axiomatic models of bargaining and Nash program	p. 226
The Nash bargaining solution	p. 226
Other axiomatic bargaining solutions	p. 236
The Nash program: the relationships between the strategic and the axiomatic approaches	p. 239
Applications	p. 242
Bilateral monopoly	p. 242
Firm-union bargaining over wage and employment	p. 244
Bibliography	p. 246
Coalitions: Cooperative and Non-Cooperative Games	p. 248
Introduction to coalition games	p. 249
General properties of cooperative games	p. 249
Interpretation and classification of solution concepts in cooperative games	p. 255
Coalition formation: cooperative or non-cooperative framework	p. 258
The domination approach: the core and related solution concepts	p. 260
The core	p. 260
Like-core solution concepts	p. 269
The valuation approach: the Shapley value and extensions	p. 276
The Shapley value	p. 276
Relationships between the Shapley Value and other solution concepts	p. 280
Extensions	p. 284
Endogenous coalition structures and formation of coalitions	p. 287
Endogenous coalition structures: generalities	p. 287
Non-cooperative games of coalition formation with externalities	p. 296
Applications	p. 304
Cost sharing games	p. 304
Environmental coalitions	p. 311
Linear programming	p. 323
Bibliography	p. 323
Evolutionary Games and Learning	p. 329
Replicator dynamics and evolutionary stable strategies: the basic biological concepts	p. 330
The Replicator dynamics	p. 330
Evolutionary stable strategies	p. 337
Neutral stability, evolutionary stable sets and robustness against equilibrium entrants	p. 340
Asymmetrical evolutionary games	p. 343
Extensions and generalizations to economics: evolution, rationality and efficiency	p. 347
Connection between Replicator dynamics, evolutionary stable strategy and other equilibrium concepts	p. 347
Evolution and dominance	p. 351
Evolutionary stability and efficiency	p. 353
Learning models	p. 356
Routine learning	p. 357
Learning by way of imitation	p. 358
Belief learning	p. 359
Applications	p. 363
International trade and the internal organization of firms	p. 363
An evolutionary version of the 'chain-store' game	p. 370
Elements of a dynamic system	p. 379
The model of Friedman and Fung (1996)	p. 381
Bibliography	p. 382
Experimental Games	p. 385
Some methodological remarks and first applications	p. 386
History and methodology	p. 386
First applications: strictly competitive games	p. 388
Cooperation	p. 391
Cooperation: altruism or strategic reputation building behaviour?	p. 392
Cooperation and backward induction in sequential games	p. 398
Coordination	p. 401
Classical coordination games	p. 403
Factors increasing coordination	p. 407
Bargaining	p. 411
The ultimatum game	p. 411
Some other bargaining games	p. 421
Coalition games	p. 425
Learning and evolution	p. 428
Questions explored in experimental evolutionary games	p. 428
Examples of experimental evolutionary game	p. 430
Learning in games	p. 435
From experimental evidences to some new game theoretic modelling principles	p. 439
Players' abilities: towards new bounded rationality principles	p. 440
Players' motivations: the new 'social utility' models	p. 444
Bibliography	p. 460
Name Index	p. 469
Subject Index	p. 474
Table of Contents provided by Ingram. All Rights Reserved.