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game theory (C7)<br />The study of the 'behaviour of independent decision makers whose fortunes are linked in an interplay of collusion, conflict and compromise' (Shubik). The theory is central to much formulation and testing of models in economics as it studies multilateral decision making. The earliest exponents of the art were couRNOT, EDGEWORTH, B6HM-BAWERK and ZEUTHEN. Much of the theory recognizes UNCERTAINTY, recently it has taken into account ignorance of rules, incomplete information and indefinite time horizons. Important solution concepts utilized are the NASH EQUILIBRIUM, the CORE, the Neumann Morgenstern stable set and the SHAPLEY value. Major applications include BILATERAL MONOPOLY, DUOPOLY, planning processes, WELFARE ECONOMICS and the study of markets and monetary institutions.<br /> <br /><em>Reference</em><br />Neumann, J. von and Morgenstern, 0. (1983) Theor y of Games and Economic Behaviour, Princeton, NJ: Princeton University Press.<br /> Schotter, A. and Schwodiauer, G. (1980)<br />'Economics and the theory of games: a survey', Journal of Economic Literature 18: 479 527.<br /> Shubik, M. (1983) Game Theory in the Social Sciences: Concepts and Solutions, Cambridge, MA, and London: MIT Press.
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