The Achievements and the Future of Game Theory: A User's Perspective Avinash Dixit Princeton...
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![Page 1: The Achievements and the Future of Game Theory: A User's Perspective Avinash Dixit Princeton University.](https://reader035.fdocuments.in/reader035/viewer/2022062518/5697bf6f1a28abf838c7d2bc/html5/thumbnails/1.jpg)
The Achievements and the Future of Game
Theory: A User's Perspective
Avinash DixitPrinceton University
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Summary overview Some game-theoretic applications
were analyzed implicitly for a long time.
Game theory is now the dominant mode of thinking in most of economics, and increasing in other social sciences.
There is a continuum from abstract theory to its uses, with feedback and contributions in both directions.
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Previous implicitly game theoretic literature
Cournot, Bertrand examples of Nash eq
Edgeworth – shrinking contract curve Social choice theory
Arrow, Sen International economics
Johnson et al (tariff wars) Information economics
Akerlof, Spence, Stiglitz
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Increasingly explicit game theoretic formulations
Gradual developments in 1960s and 70s: Debreu-Scarf (cooperative game) Wilson on auctions Hurwicz, Gibbard et al implementation Nash bargaining solution in labor Extensive form bargaining, Rubinstein
etc.More in specific fields to follow
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Microeconomics / IO More general, richer view of
competition Many dimensions of competition
strategyThese other variables are not just shifters of
demand and cost curves! Perfect competition is not price-taking,
but “expected-utility-taking” Max { E[Π] | E[U] U*}, = 0 by entry yields Max { E[U] | E[Π] 0} = U*
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Industrial organization Repeated games
Implicit collusion, chain-store paradox Feedback on theory – Abreu-Pearce-
Stacchetti etc. Two-stage games
Location and price competition Entry deterrence
Commitment (Spence, Dixit) Private information (Milgrom-Roberts)
Feedback on theory - refinements
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Labor economics Bargaining (applications in many fields)
Raiffa – Art and Science of Negotiation Search theory
“Decisions” aspect of Luce and Raiffa Matching theory and applications
Gale-Shapley, Roth et al Most of this field is empirical
Game theorists can try to use the rich data
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Macro and public economics
Games with one large player (govt) and many small players (private sector) Mechanism design in taxation
(Mirrlees) regulation (Baron-Myerson) Dynamic inconsistency, optimal
policies with and without commitment, relation to perfectness. Role of delegation
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International Economics Strategic trade policy
Two-stage games of governments & firms
Trade liberalization agreementsSelf-enforcement constraintsNeed for multilateral enforcement
Monetary and fiscal cooperationDecision-making in common central bankIntraction with national fiscal authorities
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Political economy Strategic voting, agenda manipulation
May not be realistic in mass electionsBut important in committees, legislaturesRich data allows testing, estimation
DelegationWhy? Information acquisitionLimits – Agency problemsHow – Mechanism design
Power indexesShapley-Shubik, Banzhaf
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Institutions Attaining mutually preferred social
outcomes as equilibria of individual behavior
Formal (law) not perfect Non-governmental, self-enforcing,
enforcement by third parties Creating focal points for assurance games Resolving prisoners’ dilemmas by
Information collection and dissemination Enforcing good behavior: norms and sanctions
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Order without law
http://www.youtube.com/watch?v=eC4BN9kInXg
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Law without order
http://www.youtube.com/watch?v=H2JFL1Sk21Y
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The next 50 years?
Behavioral decision and game theory Comparing findings from lab and field,
pinpointing the right mix in each context Degrees of credibility
Can this be handled in Harsanyi model Games without common knowledge
Incomplete awareness
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Basic research is a never-ending process
“Grook” by Piet Hein
Problems worthy of attack Prove their worth by hitting back