Game and economic theory

de Sergiu Hart, Abraham Neyman

Game and Economic Theory studies the interaction of decision makers whose decisions affect each other. The analysis is from a rational viewpoint: every participant would like to obtain the outcome that they prefer most. However, each one has to take into account that the others are doing the same - trying to get what they prefer most. At times this leads to fierce competition; at other times, to mutually beneficial cooperation; and in general, to an appropriate combination of these two extreme behaviors. Game theory, which may be viewed as a sort of "unified field" theory for the rational side of social science, develops the theoretical foundations for the analysis of such multiperson interactive situations and then applies these to many disciplines: economics, political science, biology, psychology, computer science, statistics, and law. Foremost among these is economic theory, where game theory is playing a central role.