Book contents
- Frontmatter
- Contents
- Preface
- 1 Introduction
- Part I Theory of the Consumer
- Part II Theory of the Producer
- Part III Partial Equilibrium Analysis: Market Structure
- 11 Perfectly Competitive Markets
- 12 Monopoly and Monopolistic Competition
- 13 Duopoly
- 14 Game Theory
- Part IV General Equilibrium Analysis
- Part V Market Failure
- Index
14 - Game Theory
from Part III - Partial Equilibrium Analysis: Market Structure
- Frontmatter
- Contents
- Preface
- 1 Introduction
- Part I Theory of the Consumer
- Part II Theory of the Producer
- Part III Partial Equilibrium Analysis: Market Structure
- 11 Perfectly Competitive Markets
- 12 Monopoly and Monopolistic Competition
- 13 Duopoly
- 14 Game Theory
- Part IV General Equilibrium Analysis
- Part V Market Failure
- Index
Summary
Introduction
In the last chapter, we discussed duopoly markets in which two firms compete to sell a product. In such markets, the firms behave strategically; each firm must think about what the other firm is doing in order to decide what it should do itself. The theory of duopoly was originally developed in the nineteenth century, but it led to the theory of games in the twentieth century. The first major book in game theory, published in 1944, was Theory of Games and Economic Behavior, by John von Neumann (1903–1957) and Oskar Morgenstern (1902–1977).We will return to the contributions of Von Neumann and Morgenstern in Chapter 19, on uncertainty and expected utility.
A group of people (or teams, firms, armies, or countries) are in a game if their decision problems are interdependent, in the sense that the actions that all of them take influence the outcomes for everyone. Game theory is the study of games; it can also be called interactive decision theory. Many real-life interactions can be viewed as games. Obviously football, soccer, and baseball games are games. But so are the interactions of duopolists, the political campaigns between parties before an election, and the interactions of armed forces and countries. Even some interactions between animal or plant species in nature can be modeled as games. In fact, game theory has been used in many different fields in recent decades, including economics, political science, psychology, sociology, computer science, and biology.
- Type
- Chapter
- Information
- A Short Course in Intermediate Microeconomics with Calculus , pp. 242 - 260Publisher: Cambridge University PressPrint publication year: 2012