Economics and the Theory of Games / Edition 1

Economics and the Theory of Games / Edition 1

by Fernando Vega-Redondo
     
 

ISBN-10: 0521775906

ISBN-13: 9780521775908

Pub. Date: 08/28/2003

Publisher: Cambridge University Press

This textbook offers a systematic, self-contained account of the main contributions of modern game theory and its applications to economics. Starting with a detailed description of how to model strategic situations, the discussion proceeds by studying basic solution concepts, their main refinements, games played under incomplete information, and repeated games. For

Overview

This textbook offers a systematic, self-contained account of the main contributions of modern game theory and its applications to economics. Starting with a detailed description of how to model strategic situations, the discussion proceeds by studying basic solution concepts, their main refinements, games played under incomplete information, and repeated games. For each of these theoretical developments, there is a companion set of applications that cover the most representative instances of game-theoretic analysis in economics, e.g., oligopolistic competition, public goods, coordination failures, bargaining, insurance markets, implementation theory, signaling, and auctions. The theory and applications covered in the first part of the book fall under the socalled classical approach to game theory, which is founded on the paradigm of players' unlimited rationality. The second part shifts toward topics that no longer abide by that paradigm. This leads to the study of important topics such as the interplay between evolution and rationality, the behavioral dynamics induced by social learning, and how players might tackle the problem of multiple equilibria.

Product Details

ISBN-13:
9780521775908
Publisher:
Cambridge University Press
Publication date:
08/28/2003
Edition description:
New Edition
Pages:
528
Product dimensions:
6.97(w) x 9.96(h) x 1.06(d)

Table of Contents

Prefacexi
1Theoretical framework1
1.1Introduction and examples1
1.2Representation of a game in extensive form4
1.3Representation of a game in strategic form12
1.4Mixed extension of a game16
Supplementary material18
1.5Mixed and behavioral strategies18
1.6Representation of a game in coalitional form23
Summary26
Exercises26
2Strategic-form analysis: theory30
2.1Dominance and iterative dominance30
2.2Nash equilibrium35
2.3Zero-sum bilateral games45
Supplementary material50
2.4Nash equilibrium: formal existence results50
2.5Strong and coalition-proof equilibria53
2.6Correlated equilibrium56
2.7Rationalizability61
Summary68
Exercises69
3Strategic-form analysis: applications72
3.1Oligopoly (I): static models72
3.2Mechanism design (I): efficient allocation of public goods83
3.3Mechanism design (II): Nash implementation90
3.4Markets (I): macroeconomic coordination failures99
Summary104
Exercises105
4Refinements of Nash equilibrium: theory110
4.1Introduction110
4.2Refinements excluding "incredible threats": examples110
4.3Subgame-perfect equilibrium115
4.4Weak perfect Bayesian equilibrium117
Supplementary material120
4.5Refinements excluding "untenable beliefs": examples120
4.6Sequential equilibrium128
4.7Perfect and proper equilibria131
4.8Strategic-form refinements135
Summary143
Exercises144
5Refinements of Nash equilibrium: applications151
5.1Oligopoly (II): sequential moves151
5.2Markets (II): decentralized price formation159
5.3Oligopoly (III): differentiated products171
5.4Mechanism design (III): efficient allocation of an indivisible object176
Summary182
Exercises184
6Incomplete information: theory188
6.1Introduction and examples188
6.2Bayesian games191
6.3Bayes-Nash equilibrium196
6.4Signaling games204
Supplementary material217
6.5Mixed strategies, revisited: a purification approach217
6.6Forward induction221
Summary225
Exercises226
7Incomplete information: applications231
7.1Markets (III): signaling in the labor market231
7.2Markets (IV): insurance markets and adverse selection244
7.3Mechanism design (IV): one-sided auctions254
7.4Mechanism design (V): buyer-seller trade267
Summary275
Exercises276
8Repeated interaction: theory281
8.1Introduction and examples281
8.2Repeated games: basic theoretical framework283
8.3Folk theorems: Nash equilibrium286
8.4Reputation and "irrationality": informal discussion294
Supplementary material300
8.5Folk theorems: subgame-perfect equilibrium300
8.6Reputation and "irrationality": formal analysis311
Summary319
Exercises321
9Repeated interaction: applications324
9.1Oligopoly (IV): intertemporal collusion in a Cournot scenario324
9.2Oligopoly (V): intertemporal collusion in a Bertrand scenario334
9.3Markets (V): efficiency wages and unemployment341
Summary351
Exercises352
10Evolution and rationality355
10.1Introduction355
10.2Static analysis356
10.3Basic dynamic analysis363
10.4Evolution in social environments372
10.5Evolution of cooperation: an example387
Summary393
Exercises394
11Learning to play398
11.1Introduction398
11.2Reinforcement learning399
11.3Static perceptions and myopic behavior412
11.4Memory, expectations, and foresight420
Summary441
Exercises442
12Social learning and equilibrium selection446
12.1Introduction446
12.2Evolutionary games: theoretical framework447
12.3Evolutionary games: alternative scenarios449
12.4Stochastic stability and equilibrium selection453
12.5Experimental evidence470
Supplementary material474
12.6Perturbed Markov processes: basic concepts and techniques474
12.7Reinforcement learning with flexible aspirations482
Summary495
Exercises496
Bibliography501
Index507

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