Game Theory and Economic Modelling [antikvár]

1 Introduction Over the past decade or two, academic economics has undergone a mild revolution in methodology, viz. the language, concepts, and techniques of non-cooperative game theory have become central to the discipline. Thirty-five years ago or so, game theory seemed to hold enormous promise in economics. But that promise seemingly went unfulfilled; twenty years ago, one might perhaps have found 'game theory' in the index of textbooks in industrial organization, but the pages referenced would usually be fairly dismissive of what might be learned from game theory. And one heard nothing of the subject from macro-economists, labour economists . . . , the list goes on seemingly without end. Nowadays one cannot find a field of economics (or of disciplines related to economics, such as finance, accounting, marketing, political science) in which understanding the concept of a Nash equilibrium is not nearly essential to the consumption of the recent literature. I am myself something of a game theorist, and it is easy to overrate the importance of one's own subfield to the overall discipline, but still I feel comfortable asserting that the basic notions of non-cooperative game theory have become a staple in the diet of students of economics. The obvious question to ask is. Why has this happened? What has game theory brought to the economists' table, that has made it such a popular tool of analysis? Nearly as obvious is, What are the deficiencies in this methodology? Methodological fads in economics are not completely unknown, and anything approaching rational expectations would lead a disinterested observer to assume that the methods of game theory have been pushed by enthusiasts (and especially those who are