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Economics and the Theory of Games - Fernando Vega-Redondo

Economics and the Theory of Games

Paperback Published: 19th December 2003
ISBN: 9780521775908
Number Of Pages: 528

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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 so-called 'classical' approach to game theory, which is founded on the paradigm of players' unlimited rationality. The second part shifts towards topics that no longer abide by that paradigm. This leads to the study of topics such as the interplay between evolution and rationality.

Prefacep. xi
Theoretical frameworkp. 1
Introduction and examplesp. 1
Representation of a game in extensive formp. 4
Representation of a game in strategic formp. 12
Mixed extension of a gamep. 16
Supplementary materialp. 18
Mixed and behavioral strategiesp. 18
Representation of a game in coalitional formp. 23
Summaryp. 26
Exercisesp. 26
Strategic-form analysis: theoryp. 30
Dominance and iterative dominancep. 30
Nash equilibriump. 35
Zero-sum bilateral gamesp. 45
Supplementary materialp. 50
Nash equilibrium: formal existence resultsp. 50
Strong and coalition-proof equilibriap. 53
Correlated equilibriump. 56
Rationalizabilityp. 61
Summaryp. 68
Exercisesp. 69
Strategic-form analysis: applicationsp. 72
Oligopoly (I): static modelsp. 72
Mechanism design (I): efficient allocation of public goodsp. 83
Mechanism design (II): Nash implementationp. 90
Markets (I): macroeconomic coordination failuresp. 99
Summaryp. 104
Exercisesp. 105
Refinements of Nash equilibrium: theoryp. 110
Introductionp. 110
Refinements excluding "incredible threats": examplesp. 110
Subgame-perfect equilibriump. 115
Weak perfect Bayesian equilibriump. 117
Supplementary materialp. 120
Refinements excluding "untenable beliefs": examplesp. 120
Sequential equilibriump. 128
Perfect and proper equilibriap. 131
Strategic-form refinementsp. 135
Summaryp. 143
Exercisesp. 144
Refinements of Nash equilibrium: applicationsp. 151
Oligopoly (II): sequential movesp. 151
Markets (II): decentralized price formationp. 159
Oligopoly (III): differentiated productsp. 171
Mechanism design (III): efficient allocation of an indivisible objectp. 176
Summaryp. 182
Exercisesp. 184
Incomplete information: theoryp. 188
Introduction and examplesp. 188
Bayesian gamesp. 191
Bayes-Nash equilibriump. 196
Signaling gamesp. 204
Supplementary materialp. 217
Mixed strategies, revisited: a purification approachp. 217
Forward inductionp. 221
Summaryp. 225
Exercisesp. 226
Incomplete information: applicationsp. 231
Markets (III): signaling in the labor marketp. 231
Markets (IV): insurance markets and adverse selectionp. 244
Mechanism design (IV): one-sided auctionsp. 254
Mechanism design (V): buyer-seller tradep. 267
Summaryp. 275
Exercisesp. 276
Repeated interaction: theoryp. 281
Introduction and examplesp. 281
Repeated games: basic theoretical frameworkp. 283
Folk theorems: Nash equilibriump. 286
Reputation and "irrationality": informal discussionp. 294
Supplementary materialp. 300
Folk theorems: subgame-perfect equilibriump. 300
Reputation and "irrationality": formal analysisp. 311
Summaryp. 319
Exercisesp. 321
Repeated interaction: applicationsp. 324
Oligopoly (IV): intertemporal collusion in a Cournot scenariop. 324
Oligopoly (V): intertemporal collusion in a Bertrand scenariop. 334
Markets (V): efficiency wages and unemploymentp. 341
Summaryp. 351
Exercisesp. 352
Evolution and rationalityp. 355
Introductionp. 355
Static analysisp. 356
Basic dynamic analysisp. 363
Evolution in social environmentsp. 372
Evolution of cooperation: an examplep. 387
Summaryp. 393
Exercisesp. 394
Learning to playp. 398
Introductionp. 398
Reinforcement learningp. 399
Static perceptions and myopic behaviorp. 412
Memory, expectations, and foresightp. 420
Summaryp. 441
Exercisesp. 442
Social learning and equilibrium selectionp. 446
Introductionp. 446
Evolutionary games: theoretical frameworkp. 447
Evolutionary games: alternative scenariosp. 449
Stochastic stability and equilibrium selectionp. 453
Experimental evidencep. 470
Supplementary materialp. 474
Perturbed Markov processes: basic concepts and techniquesp. 474
Reinforcement learning with flexible aspirationsp. 482
Summaryp. 495
Exercisesp. 496
Bibliographyp. 501
Indexp. 507
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ISBN: 9780521775908
ISBN-10: 0521775906
Audience: Professional
Format: Paperback
Language: English
Number Of Pages: 528
Published: 19th December 2003
Publisher: Cambridge University Press
Country of Publication: GB
Dimensions (cm): 25.2 x 18.0  x 2.9
Weight (kg): 0.9