Game theory and economic analysis

192 Pages·2002·0.929 MB·English

by  Schmidt Ch.

Game Theory and Economic
Analysis
Game Theory and Economic Analysis presents the wide range of current con-
tributions of game theory to economics. The chapters fall broadly into two
categories. Some lay out in a jargon-free manner a particular branch of the
theory, the evolution of one of its concepts, or a problem that runs through
its development. Others are original pieces of work that are significant to
game theory as a whole.
After taking the reader through a concise history of game theory, the
contributors discuss such topics as:
• the connections between Von Neumann’s mathematical game theory and
the domain assigned to it today since Nash
• the strategic use of information by game players
• the problem of the coordination of strategic choices between independ-
ent players in non-cooperative games
• cooperative games and their place within the literature of games
• incentive and the implementation of a collective decision in game-
theoretic modeling
• team games and the implications for firms’ management.
The nature of the subject and the angle from which it is examined will ensure
that Game Theory and Economic Analysis reaches a wide readership. As an
established scholar in the area of game theory, Christian Schmidt has pro-
duced an authoritative book with contributions from economists of the very
highest rank and profile, some of them well known beyond the boundaries of
the game-theoretic community.
Christian Schmidt is Professor at the University of Paris-Dauphine. He has
recently published La théorie des jeux: essai d’interprétation (PUF, 2001).
© 1995 Éditions Dalloz
English edition: editorial matter and selection © 2002 Christian
Schmidt; individual chapters © the contributors
Routledge Advances in Game Theory
Edited by Christian Schmidt
1 Game Theory and Economic Analysis
A quiet revolution in economics
Edited by Christian Schmidt
© 1995 Éditions Dalloz
English edition: editorial matter and selection © 2002 Christian
Schmidt; individual chapters © the contributors
Game Theory and Economic
Analysis
A quiet revolution in economics
Edited by Christian Schmidt
London and New York
© 1995 Éditions Dalloz
English edition: editorial matter and selection © 2002 Christian
Schmidt; individual chapters © the contributors
First published in French in 1995 as
Théorie des jeux et analyse économique 50 ans après (special issue of
Revue d’Economie Politique, 1995, no. 4, pp. 529–733)
by Éditions Dalloz (Paris)
This edition published 2002
by Routledge
11 New Fetter Lane, London EC4P 4EE
Simultaneously published in the USA and Canada
by Routledge
29 West 35th Street, New York, NY 10001
Routledge is an imprint of the Taylor & Francis Group
This edition published in the Taylor & Francis e-Library, 2004.
© 1995 Éditions Dalloz
English edition: editorial matter and selection © 2002 Christian
Schmidt; individual chapters © the contributors
All rights reserved. No part of this book may be reprinted or
reproduced or utilized in any form or by any electronic,
mechanical, or other means, now known or hereafter
invented, including photocopying and recording, or in any
information storage or retrieval system, without permission in
writing from the publishers.
British Library Cataloguing in Publication Data
A catalogue record for this book is available from the British Library
Library of Congress Cataloging in Publication Data
Game theory and economic analysis / [edited by] Christian Schmidt.
p. cm. – (Routledge advances in game theory; 001)
Includes bibliographical references and index.
1. Game theory. 2. Economics. I. Schmidt, Christian. II.
Series.
HB144.G3727 2002
330′.01′5193 – dc21 2001056890
ISBN 0-203-16740-6 Master e-book ISBN
ISBN 0-203-26226-3 (Adobe eReader Format)
ISBN 0–415–25987–8(Print Edition)
© 1995 Éditions Dalloz
English edition: editorial matter and selection © 2002 Christian
Schmidt; individual chapters © the contributors
Contents
List of contributors
Introduction
CHRISTIAN SCHMIDT
PART I
Historical insight
1 Von Neumann and Morgenstern in historical perspective
ROBERT W. DIMAND AND MARY ANN DIMAND
2 Rupture versus continuity in game theory: Nash versus Von
Neumann and Morgenstern
CHRISTIAN SCHMIDT
PART II
Theoretical content
3 Bluff and reputation
SYLVAIN SORIN
4 An appraisal of cooperative game theory
HERVÉ MOULIN
5 The coalition concept in game theory
SÉBASTIEN COCHINARD
6 Do Von Neumann and Morgenstern have heterodox followers?
CHRISTIAN SCHMIDT
© 1995 Éditions Dalloz
English edition: editorial matter and selection © 2002 Christian
Schmidt; individual chapters © the contributors
7 From specularity to temporality in game theory
JEAN-LOUIS RULLIÈRE AND BERNARD WALLISER
PART III
Applications
8 Collective choice mechanisms and individual incentives
CLAUDE D’ASPREMONT AND LOUIS-ANDRÉ GÉRARD-VARET
9 Team models as a framework to analyze coordination problems
within the firm
JEAN-PIERRE PONSSARD, SÉBASTIEN STEINMETZ, AND
HERVÉ TANGUY
© 1995 Éditions Dalloz
English edition: editorial matter and selection © 2002 Christian
Schmidt; individual chapters © the contributors
Contributors
Sébastien Cochinard. LESOD, University of Laon, France.
Claude d’Aspremont. CORE, Catholic University of Louvain, France.
Mary Ann Dimand. Albion College, Michigan, USA.
Robert W. Dimand. Brock University, Canada.
The late Louis-André Gérard-Varet. Universities of Aix-Marseilles II and III,
France.
Hervé Moulin. Rice University, Texas, USA.
Jean-Pierre Ponssard. Laboratoire d’Econométrie, Ecole Polytechnique,
Paris, France.
Jean-Louis Rullière. University of Lyons Lumière 2, France.
Christian Schmidt. University of Paris-Dauphine, Paris, France.
Sylvain Sorin. Laboratoire d’Econométrie, Ecole Polytechnique, Paris,
France.
Sébastien Steinmetz. INRA, France.
Hervé Tanguy. INRA, France.
Bernard Walliser. HESS, Ecole Nationale des Ponts et Chaussées, France.
© 1995 Éditions Dalloz
English edition: editorial matter and selection © 2002 Christian
Schmidt; individual chapters © the contributors
Introduction
Christian Schmidt
Game theory has already observed the passage of its fiftieth birthday; that is,
if one accepts the conventional chronology which places its birth at the publi-
cation of Theory of Games and Economic Behavior (TGEB) by Von Neumann
and Morgenstern (1944). This anniversary evidently did not escape the notice
of the Academy of Stockholm, which in 1994 awarded the Nobel Prize in
Economic Sciences to three game theorists, Nash, Harsanyi, and Selten. A
look back at its brief history brings out several troubling similarities with
economic science, in places where one might not expect to find them.
Game theory was invented in order to satisfy a mathematical curiosity. The
difficulty at the outset was to find a theoretical solution to the problems posed
by uncertainty in games of chance. The example of checkers interested
Zermelo (1913), and then the first complete mathematical formulation of
strategies for games “in which chance (hasard) and the ability of the players
plays a role” was sketched out by Borel (1924), who was himself co-author of
a treatise on bridge. Nothing about this singular and rather marginal branch
of mathematics would at this time have suggested its later encounter with
economics.1 The analogy between economic activity and what goes on in
casinos was only suggested much later, in a far different economic environ-
ment than that which these two mathematicians would have been able to
observe.
One could say that J. Von Neumann was the person who both conferred a
sense of scientific legitimacy upon this mathematical construction, and whose
work would lead to the connection with economic analysis.2 The principal
stages were as follows:
• 1928: Von Neumann demonstrates his minimax theory. This demonstra-
tion occurs within the framework of a category of two-person zero-sum
games in which, to use Borel’s terminology, chance (hasard) plays no
part, at least no explicit part, and in which the results depend solely upon
the reason of the players, not upon their ability. “Strategic games” lend
themselves naturally to an economic interpretation (Von Neumann 1928)
• 1937: Pursuing his topological work on the application of the fixed-point
theorem, Von Neumann discovers the existence of a connection between
© 1995 Éditions Dalloz
English edition: editorial matter and selection © 2002 Christian
Schmidt; individual chapters © the contributors