Game Theory and Economic Modelling

Abstract
Beginning in the early to the mid‐1970s, non‐cooperative game theory became an important tool of economics. This book is based on a series of lectures given at Oxford, and comments on this use of non‐cooperative game theory. After providing a non‐technical introduction to the basic ideas of non‐cooperative game theory, the book discusses: (1) how and why game theory has been a success—because it permits economists to model and analyse situations of dynamic competition and where private information plays an important role; (2) how and why the theory has failed—to provide an understanding of when it (and equilibrium analysis) applies, when not, and what to do when not; and (3) how its weaknesses might be addressed—by considering individuals who are imperfectly rational and learn adaptively.