Game Theory for Applied Economists Reprint Edition

Great book with just the right balance between game theory and applied economics. Don't get it if you really want hard core game theory proofs. There are plenty of equations and some proofs, but the real focus is on how the results of game theory can be applied to economic problems.

Easy to read. This is an ENTRY level book to Game Theory, but that is what I wanted. I read it over winter break and it helped lay the foundation for me to ace a PhD level Game Theory course.

I finally got around to reading this after purchasing it over a decade ago. Game Theory for Applied Economists provides the reader with an approachable introduction to game theory through the description and solution of various canonical situations which can be analyzed through a game theoretic lens. The approach is not overly mathematical and the author tries to build intuition over focusing on the formal structure but includes proofs where required and develops formal definitions when needed. The topics included in the book are static games of complete information, dynamic games of complete information and the subsequent analysis of such games with incomplete information.The book starts out with analyzing game theories most famous candidate of how pareto inferior outcomes can arise naturally, the prisoner's dilemma. The author describes the analysis and brings in ideas formalizing strictly dominated strategies and subsequently iterated elimination of strictly dominated strategies. The author brings introduces ideas like strategy space, common knowledge, payoff profiles and Nash equilibrium. The author then goes on to reintroduce elementary microeconomic situations like the duopoly and how to solve such games using a game theory lens. The author introduces mixed strategies as well and gives an overview of fixed point ideas associated with the proof of an existence of a Nash equilibrium with mixed strategies. The author then gets into dynamic games and backwards induction techniques. The use of subgame solutions to get to overall game solutions is discussed and the author discusses Nash equilibriums with discounting payoffs. The author uses examples of bank runs and wage bargaining to reinforce the practical economic situations which game theory can be used as a tool to analyze. The author then gets into static games of incomplete information and starts to bring in Bayesian ideas and expectations of utility over a probability space. The subject matter is approachable but the lack of formal definitions earlier in the book starts to makes the introduction of new ideas slightly more cumbersome. The author brings up some ideas from auctions to help the reader understand decision making under uncertainty. I don't love the treatment as I think it would be better to first describe mechanism design for auctions that eliminate the need for Bayesian logic and then introduce the Bayesian game (ie Vickrey auction mechanism to start vs traditional auction mechanism to then analyze). The author then gets into multi-period games of incomplete information including the job market where worker production is noisy and monetary policy with adaptive inflation expectations. The treatment gives the reader a lot of concrete examples to think about modeling under uncertainty; the natural state of the world.Game theory for applied economists is a very readable introduction to game theory. For a reader looking for examples of how to use game theory this book is good, for a reader trying to trying to understand formal game theory better it is not as good. The use of economic examples is prioritized which is definitely useful for building intuition but it has its drawbacks for a reader moving on to read other literature where the reader will likely find themselves unprepared. Definitely recommend the book for someone looking for a quick practical introduction to the subject but for further study the book needs to be supplemented.

This is was my textbook when I was pursuing my PhD in economics. 7 years after graduating, I still enjoy review it from time to time.

The stuff in the book really met my academics requirements. Almost all I needed is found in this book.

Game theory is a very interesting intellectual exercise. It is tempting to believe that there are lessons to be learned from game theory that have some application in life. This is a temptation to avoid. In game theory, the appropriate action to take depends on the full range of possibilities and all of their consequences, and on all the possible actions of all other people involved, and whatever decision processes those other people are using. Unless one can specify all of these things, one cannot use game theory to analyze a situation. Why? Because very small changes in the specification of a game can lead to very different outcomes. During the Cuban missile crisis, most of President Kennedy‘s advisors saw a limited set of options before them. This led them to advise bombing Cuba. John Kennedy had a good liberal arts education and, incidentally, did not know any game theory. What he did have was the wisdom to think through a solution that very likely avoided a nuclear war. Game theoretical analyses also assume that we can be explicit about all of our knowledge, the actions available to us, our beliefs, etc. However, we do not operate on the level of conscious thought alone. All but a tiny portion of our behavior is driven by the very complex thinking that happens below the level of consciousness. Kennedy had intuitions — based on knowledge that formed his subconscious thought processes — that led him to ignore his advisors. The extra bit of knowledge that drove Kennedy’s decision making made the difference between a peaceful resolution of the crisis and a nuclear war. When small differences in model inputs lead to small differences in outcomes, models are useful for analyzing things in the real world. When small differences in inputs lead to large differences in outcomes (e.g. peace versus nuclear annihilation), then we delude ourselves if we believe the models can be used to understand or analyze real life situations.

This book contains the very basics of game theory. Really detailed and well explained, although the examples are simple. I would prefer more elaborate examples for difficult cases.

An essential for every first learner of Game Theory with a reasonable math background.