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=== Economics ===<!-- This Anchor tag serves to provide a permanent target for incoming section links. Please do not remove it, nor modify it, except to add another appropriate anchor. If you modify the section title, please anchor the old title. It is always best to anchor an old section header that has been changed so that links to it will not be broken. See [[Template:Anchor]] for details. This template is {{subst:Anchor comment}} --> Game theory is a major method used in mathematical economics and business for [[Economic model|modeling]] competing behaviors of interacting [[Agent (economics)|agents]].{{efn|At [[JEL classification codes#Mathematical and quantitative methods JEL: C Subcategories|JEL:C7]] of the ''[[Journal of Economic Literature]]'' classification codes.}}<ref>{{cite book |author-link= Robert Aumann |first=Robert J. |last=Aumann |date=2008 |chapter=game theory |title=[[The New Palgrave Dictionary of Economics]] |edition=2nd |chapter-url= http://www.dictionaryofeconomics.com/article?id=pde2008_G000007&edition=current&q=game%20theory&topicid=&result_number=4 |access-date=22 August 2011 |archive-url=https://web.archive.org/web/20110515034120/http://www.dictionaryofeconomics.com/article?id=pde2008_G000007&edition=current&q=game%20theory&topicid=&result_number=4 |archive-date=15 May 2011 |url-status=dead }}</ref><ref>{{cite book |author-link= Martin Shubik |first=Martin |last=Shubik |date=1981 |chapter=Game Theory Models and Methods in Political Economy |editor-link1=Kenneth Arrow |editor-first1=Kenneth |editor-last1=Arrow |editor-first2= Michael |editor-last2=Intriligator |title=Handbook of Mathematical Economics, v. 1 |volume=1 |version=1 |pages=285โ330 |doi=10.1016/S1573-4382(81)01011-4|isbn=978-0-444-86126-9 }}</ref><ref>{{cite journal |last= Shapiro|first=Carl|author-link=Carl Shapiro|date=Spring 1989|title=The Theory of Business Strategy|journal=The RAND Journal of Economics|volume=20|number=1|pages=125โ137|jstor=2555656 |publisher= [[Wiley (publisher)|Wiley]] |pmid= 10296625 }}.</ref> Applications include a wide array of economic phenomena and approaches, such as [[auction]]s, [[bargaining]], [[mergers and acquisitions]] pricing,<ref name="GT-A-E-00">{{cite conference|last1=Agarwal|first1=N.|last2=Zeephongsekul|first2=P.|url=http://www.mssanz.org.au/modsim2011/D6/agarwal.pdf |title=Psychological Pricing in Mergers & Acquisitions using Game Theory|conference=19th International Congress on Modelling and Simulation|conference-url=https://mssanz.org.au/modsim2011/ |location=[[Perth]]|access-date=February 3, 2023|date=December 11โ12, 2011}}</ref> [[fair division]], [[duopoly|duopolies]], [[oligopoly|oligopolies]], [[social network]] formation, [[agent-based computational economics]],<ref>{{cite book |doi=10.1016/S1574-0021(05)02016-2 |title=Agent-Based Computational Economics: A Constructive Approach to Economic Theory |series=Handbook of Computational Economics |date=2006 |last1=Tesfatsion |first1=Leigh |volume=2 |pages=831โ880 |isbn=978-0-444-51253-6 }}</ref><ref>{{cite book |date=2008 |title=The New Palgrave Dictionary of Economics |chapter=computer science and game theory |author=[[Joseph Y. Halpern]] |chapter-url=http://www.dictionaryofeconomics.com/article?id=pde2008_C000566&edition=current&topicid=&result_number=1 }}</ref> [[general equilibrium]], mechanism design,<ref>{{cite book |date=2008 |title=The New Palgrave Dictionary of Economics |chapter=mechanism design |author-link=Roger B. Myerson |first=Roger B. |last=Myerson |chapter-url=http://www.dictionaryofeconomics.com/article?id=pde2008_M000132&edition=current&q=mechanism%20design&topicid=&result_number=3 |access-date=4 August 2011 |archive-url=https://web.archive.org/web/20111123042038/http://www.dictionaryofeconomics.com/article?id=pde2008_M000132&edition=current&q=mechanism%20design&topicid=&result_number=3 |archive-date=23 November 2011 |url-status=dead }}</ref><ref>{{cite book |date=2008 |title=The New Palgrave Dictionary of Economics |chapter=revelation principle |author-link=Roger B. Myerson |first=Roger B. |last=Myerson |chapter-url=http://www.dictionaryofeconomics.com/article?id=pde2008_R000137&edition=current&q=moral&topicid=&result_number=1 |access-date=4 August 2011 |archive-date=16 May 2013 |archive-url=https://web.archive.org/web/20130516143359/http://www.dictionaryofeconomics.com/article?id=pde2008_R000137&edition=current&q=moral&topicid=&result_number=1 |url-status=live }}</ref><ref>{{cite book |date=2008 |title=The New Palgrave Dictionary of Economics |chapter=computing in mechanism design |first=Tuomas |last=Sandholm |chapter-url=http://www.dictionaryofeconomics.com/article?id=pde2008_C000563&edition=&field=keyword&q=algorithmic%20mechanism%20design&topicid=&result_number=1 |access-date=5 December 2011 |archive-url=https://web.archive.org/web/20111123042038/http://www.dictionaryofeconomics.com/article?id=pde2008_C000563&edition=&field=keyword&q=algorithmic%20mechanism%20design&topicid=&result_number=1 |archive-date=23 November 2011 |url-status=dead }}</ref><ref name= "nisanronen2001">{{cite journal |last1=Nisan |first1=Noam |last2=Ronen |first2=Amir |title=Algorithmic Mechanism Design |journal=Games and Economic Behavior |date=April 2001 |volume=35 |issue=1โ2 |pages=166โ196 |doi=10.1006/game.1999.0790 }}</ref><ref name="nisan2007">{{cite book|editor-link1=Noam Nisan |editor-first1=Noam |editor-last1=Nisan|editor-last2=Roughgarden|editor-first2=Tim|editor-last3=Tardos|editor-first3= Eva |editor-last4= Vazirani|editor-first4=Vijay V.|year=2007|title=Algorithmic Game Theory |publisher=[[Cambridge University Press]]|isbn=9780521872829|lccn=2007014231}}</ref> and [[voting system]]s;<ref>{{cite book|doi=10.1016/S1574-0005(05)80062-1|title=Chapter 30 Voting procedures|volume=2|pages=1055โ1089|series=Handbook of Game Theory with Economic Applications |year= 1994 |last1= Brams|first1=Steven J.|isbn=978-0-444-89427-4}} and {{cite book|doi=10.1016/S1574-0005(05)80063-3|title=Chapter 31 Social choice|volume=2|pages=1091โ1125|series=Handbook of Game Theory with Economic Applications|year=1994|last1=Moulin|first1=Hervรฉ|isbn=978-0-444-89427-4}}</ref> and across such broad areas as experimental economics,<ref>{{cite journal |last1=Smith |first1=Vernon L. |title=Game Theory and Experimental Economics: Beginnings and Early Influences |journal=History of Political Economy |date=December 1992 |volume=24 |issue=Supplement |pages=241โ282 |doi=10.1215/00182702-24-Supplement-241 }}</ref><ref>{{cite book|doi= 10.1016/B0-08-043076-7/02232-4 |chapter=Experimental Economics|title=International Encyclopedia of the Social & Behavioral Sciences|pages=5100โ5108|year=2001|last=Smith|first=Vernon L.|author-link= Vernon L. Smith |isbn= 978-0-08-043076-8}}</ref><ref>{{cite book |editor1-last=Plott |editor1-first=Charles R. |editor2-last=Smith |editor2-first=Vernon L. |title=Handbook of Experimental Economics Results |date=2008 |publisher=Elsevier |isbn=978-0-08-088796-8 }}{{page needed|date=July 2024}}</ref><ref>Vincent P. Crawford (1997). "Theory and Experiment in the Analysis of Strategic Interaction," in ''Advances in Economics and Econometrics: Theory and Applications'', pp. [http://weber.ucsd.edu/~vcrawfor/CrawfordThExp97.pdf 206โ242] {{Webarchive|url=https://web.archive.org/web/20120401234518/http://weber.ucsd.edu/~vcrawfor/CrawfordThExp97.pdf |date=1 April 2012 }}. Cambridge. Reprinted in Colin F. Camerer ''et al''., ed. (2003). ''Advances in Behavioral Economics'', Princeton. 1986โ2003 papers. [http://press.princeton.edu/titles/8437.html Description] {{Webarchive|url=https://web.archive.org/web/20120118024451/http://press.princeton.edu/titles/8437.html |date=18 January 2012 }}, [https://books.google.com/books?id=sA4jJOjwCW4C&pg=PR7 preview], Princeton, ch. 12</ref><ref>{{cite book|doi=10.1016/S1574-0005(02)03025-4|chapter=Chapter 62 Game theory and experimental gaming |title=Handbook of Game Theory with Economic Applications Volume 3|volume=3|pages=2327โ2351|year=2002|last1=Shubik|first1=Martin|isbn=978-0-444-89428-1}}</ref> [[Behavioral game theory|behavioral economics]],<ref>{{cite book |date=2008 |title=The New Palgrave Dictionary of Economics }}[[Faruk Gul]]. "behavioural economics and game theory." [http://www.dictionaryofeconomics.com/article?id=pde2008_G000210&q=Behavioral%20economics%20&topicid=&result_number=2 Abstract.] {{Webarchive|url=https://web.archive.org/web/20170807112808/http://www.dictionaryofeconomics.com/article?id=pde2008_G000210&q=Behavioral%20economics%20&topicid=&result_number=2 |date=7 August 2017 }}</ref><ref>{{cite book |date=2008 |title=The New Palgrave Dictionary of Economics |chapter=behavioral game theory |author-link=Colin F. Camerer |first=Colin F. |last=Camerer |chapter-url=http://www.dictionaryofeconomics.com/article?id=pde2008_B000302&q=Behavioral%20economics%20&topicid=&result_number=13 |access-date=4 August 2011 |archive-url=https://web.archive.org/web/20111123034346/http://www.dictionaryofeconomics.com/article?id=pde2008_B000302&q=Behavioral%20economics%20&topicid=&result_number=13 |archive-date=23 November 2011 |url-status=dead }}</ref><ref>{{cite journal |author-link=Colin F. Camerer |first=Colin F. |last=Camerer |date=1997 |title=Progress in Behavioral Game Theory |journal=Journal of Economic Perspectives |volume=11 |issue=4 |pages=172 |doi=10.1257/jep.11.4.167 |url=https://resolver.caltech.edu/CaltechAUTHORS:20110211-074641387 }}</ref><ref>{{cite book |author-link=Colin F. Camerer |first=Colin F. |last=Camerer |date=2003 |title=Behavioral Game Theory |publisher= Princeton}} [http://press.princeton.edu/chapters/i7517.html Description] {{Webarchive|url=https://web.archive.org/web/20110514201411/http://press.princeton.edu/chapters/i7517.html |date= 14 May 2011 }}, [https://books.google.com/books?id=cr_Xg7cRvdcC&pg=PR7 preview] {{Webarchive|url=https://web.archive.org/web/20230326164811/https://books.google.com/books?id=cr_Xg7cRvdcC&pg=PR7 |date=26 March 2023 }} ([ctrl]+), and ch. 1 [http://press.princeton.edu/chapters/i7517.pdf link] {{Webarchive|url=https://web.archive.org/web/20130704185133/http://press.princeton.edu/chapters/i7517.pdf |date=4 July 2013 }}.</ref><ref>{{cite book |editor1-last=Camerer |editor1-first=Colin F. |editor2-last=Loewenstein |editor2-first=George |editor3-last=Rabin |editor3-first=Matthew |title=Advances in Behavioral Economics |date=2011 |publisher=Princeton University Press |isbn=978-1-4008-2911-8 }}{{page needed|date=July 2024}}</ref><ref>{{cite journal |first=Drew |last=Fudenberg |author-link=Drew Fudenberg |date=2006 |title=Advancing Beyond Advances in Behavioral Economics |journal=Journal of Economic Literature |volume=44 |issue=3 |pages=694โ711 |doi=10.1257/jel.44.3.694 |jstor=30032349 |s2cid=3490729 |url=http://nrs.harvard.edu/urn-3:HUL.InstRepos:3208222 }}</ref> [[information economics]],<ref name=r7a>{{cite book |first=Eric |last=Rasmusen |date=2007 |title=Games and Information |publisher= Wiley |isbn=978-1-4051-3666-2 |edition=4th |url=https://books.google.com/books?id=5XEMuJwnBmUC&pg=PR5}}</ref><ref name=r7b>{{cite book |last1=Kreps |first1=David M. |author-link=David M. Kreps |title=Game Theory and Economic Modelling |date=1990 |publisher=Oxford University Press |isbn=978-0-19-828381-2 |doi=10.1093/0198283814.001.0001 }}{{page needed|date=July 2024}}</ref><ref name=r7c>{{cite book |editor1-last=Aumann |editor1-first=R. J. |editor2-last=Hart |editor2-first=S. |title=Handbook of Game Theory with Economic Applications |date=1992 |publisher=Elsevier |isbn=978-0-444-89427-4 }}{{page needed|date=July 2024}}</ref><ref name=r7d>{{cite book|doi=10.1016/S1574-0005(02)03006-0|chapter=Chapter 43 Incomplete information |title=Handbook of Game Theory with Economic Applications Volume 3|volume=3|pages=1665โ1686|year=2002|last1=Aumann |first1=Robert J.|last2=Heifetz|first2=Aviad|isbn= 978-0-444-89428-1}}</ref> [[industrial organization]],<ref>{{cite book |author-link=Jean Tirole |first=Jean |last=Tirole |date=1988 |title=The Theory of Industrial Organization |publisher=MIT Press}} [https://archive.org/details/theoryofindustri00jean Description] and chapter-preview links, pp. [https://archive.org/details/theoryofindustri00jean viiโix], "General Organization," pp. [https://archive.org/details/theoryofindustri00jean/page/5 5โ6], and "Non-Cooperative Game Theory: A User's Guide Manual,' " ch. 11, pp. [https://archive.org/details/theoryofindustri00jean/page/423 423โ59].</ref><ref>{{cite book |doi=10.1016/S1574-0005(02)03012-6 |chapter=Game theory and industrial organization |title=Handbook of Game Theory with Economic Applications Volume 3 |date=2002 |last1=Bagwell |first1=Kyle |last2=Wolinsky |first2=Asher |volume=3 |pages=1851โ1895 |isbn=978-0-444-89428-1 }}</ref><ref>{{cite journal |last1=Fels |first1=E. M. |title=Review of Strategy and Market Structure: Competition, Oligopoly, and the Theory of Games |journal=Weltwirtschaftliches Archiv |date=1961 |volume=87 |pages=12โ14 |jstor=40434883 }}</ref><ref>{{cite journal |last1=Reid |first1=Gavin C. |title=Review of Market Structure and Behavior |journal=The Economic Journal |date=1982 |volume=92 |issue=365 |pages=200โ202 |doi=10.2307/2232276 |jstor=2232276 }}</ref> and [[political economy]].<ref>Martin Shubik (1981). "Game Theory Models and Methods in Political Economy," in ''Handbook of Mathematical Economics'', v. 1, pp. 285โ330 {{doi|10.1016/S1573-4382(81)01011-4}}.</ref><ref>Martin Shubik (1987). ''A Game-Theoretic Approach to Political Economy''. MIT Press. [http://mitpress.mit.edu/catalog/item/default.asp?tid=5086&ttype=2 Description]. {{webarchive |url=https://web.archive.org/web/20110629151809/http://mitpress.mit.edu/catalog/item/default.asp?tid=5086&ttype=2 |date=29 June 2011 }}</ref><ref>Martin Shubik (1978). "Game Theory: Economic Applications," in W. Kruskal and J.M. Tanur, ed., ''International Encyclopedia of Statistics'', v. 2, pp. 372โ78.</ref><ref name="r7c"/> This research usually focuses on particular sets of strategies known as [[Solution concept|"solution concepts" or "equilibria"]]. A common assumption is that players act rationally. In non-cooperative games, the most famous of these is the Nash equilibrium. A set of strategies is a Nash equilibrium if each represents a best response to the other strategies. If all the players are playing the strategies in a Nash equilibrium, they have no unilateral incentive to deviate, since their strategy is the best they can do given what others are doing.<ref name="GT-F-R-09">{{cite web|url=http://www.insead.edu/facultyresearch/research/doc.cfm?did=46503 |title=Game-theoretic model to examine the two tradeoffs in the acquisition of information for a careful balancing act |archive-url=https://web.archive.org/web/20130524231021/http://www.insead.edu/facultyresearch/research/doc.cfm?did=46503 |archive-date=24 May 2013 |publisher=[[INSEAD]] |first=Markus |last=Christen |date=1 July 1998 |url-status=dead |access-date=1 July 2012 }}</ref><ref name="GT-F-R-10">{{cite web |url=http://www.europeanfinancialreview.com/?p=4645 |url-status=dead |title=Options Games: Balancing the trade-off between flexibility and commitment |archive-url=https://web.archive.org/web/20130620053305/http://www.europeanfinancialreview.com/?p=4645 |archive-date=20 June 2013 |website=The European Financial Review |date=15 February 2012 |access-date=2013-01-03 |first1=Benoรฎt |last1=Chevalier-Roignant |first2=Lenos |last2=Trigeorgis }}</ref> The payoffs of the game are generally taken to represent the [[utility]] of individual players. A prototypical paper on game theory in economics begins by presenting a game that is an abstraction of a particular economic situation. One or more solution concepts are chosen, and the author demonstrates which strategy sets in the presented game are equilibria of the appropriate type. Economists and business professors suggest two primary uses (noted above): ''descriptive'' and ''[[Decision theory#Normative and descriptive decision theory|prescriptive]]''.<ref name="Camerer2003" /> ==== Managerial economics ==== Game theory also has an extensive use in a specific branch or stream of economics โ [[Managerial economics|Managerial Economics]]. One important usage of it in the field of managerial economics is in analyzing strategic interactions between firms.<ref>{{cite book |doi=10.1017/CBO9780511810534.015 |chapter=Game theory |title=Managerial Economics |date=2005 |pages=331โ381 |isbn=978-0-521-81993-0 |first1=Nick |last1=Wilkinson }}</ref> For example, firms may be competing in a market with limited resources, and game theory can help managers understand how their decisions impact their competitors and the overall market outcomes. Game theory can also be used to analyze cooperation between firms, such as in forming strategic alliances or joint ventures. Another use of game theory in managerial economics is in analyzing pricing strategies. For example, firms may use game theory to determine the optimal [[pricing strategy]] based on how they expect their competitors to respond to their pricing decisions. Overall, game theory serves as a useful tool for analyzing strategic interactions and decision making in the context of managerial economics.
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