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.
Readership: All those interested in the applications of game theory to economics, from undergraduates to
David M. Kreps, Paul E. Holden Professor of Economics, Graduate School of Business, Stanford University
"`fascinating little book' Jean Tirole, Journal of Economic Literature"
"`a book I could not put down ... the exposition is remarkably clear' Journal of Economic Perspectives"
"`Will rapidly be established as a basic reference for students and their teachers ... even the less mathematically inclined economists will find much to gain from the application of new game theory techniques in economics.' Scottish Journal of Political Economy"
"'It is partly a measure of how much macroeconomics has ceased to be a separate subject from microeconomics that workers in my field will now find so much to interest them in this book. It is more a measure of how engaging this book is.'
Thomas J. Sargent, University of Chicago, Journal of Political Economy"
"'The writing is in a very personalised style. Though the book is putatively for the novice, or less formally trained reader, the presentation and the level of the debate does make certain demands. It nevertheless is frontline stuff.'
Economics Times, April 1992"
"'I view Krep's discussions in the book as both interesting and helpful in describing certain key weaknesses of standard game theory.'
Ronald Heiner, George Mason University, Constitutional Political Economy, Vol. 3, No. 1, 1992"
"'Kreps has written a book that makes a sincere attempt to demystify game theory for the uninitiated and set the stage for a serious appraisal of the scope and limitations of game theory ... it does manage to convey a flavour of the excitement that comes from grappling with strategic behaviour, and hopefully should convince the reader with an open mind that game theoretic questions and applications are abstractions of relevant economic issues.'
Anindya Sen, Economic and Political Weekly, Vol XXVII No 14 April 4, 1992"
1: The standard
2: Basic notions of noncooperative game theory
3: The successes of game theory
4: The problems of game theory
5: Bounded rationality and retrospection