Section Topics that hav e been extensively reorganized or rewritten include Section 4. I have recast 1. Every other chapter has also been revised in minor ways. To help with this problem, I ha ve now starred the sections that I think are skippable.
For reference, I continue to have xvi those sections close to where the subjects are introduced. The two most novel features of the book are not contained within its covers. This is available from Blackwell Publishers, and contains scholarly articles, news clippings, and cartoons arranged to correspond with the chapters of the book.
I have tried especially to include material that is s omewhat obscure or hard to locate, rather than just a c ollection of classic articles from leading journals. Part I by itself would be appropriate for a course on game theory, and sections from Part III could be added for illustration.
If students are already familiar with basic game theory, Part II can be used for a course on information economics. The entire book would be useful as a s econdary text for a c ourse on industrial organization.
Exercises and notes follow the chapters. It i s useful to supplemen t a book like this with original articles, but I leave it to m y readers or their instructors to follow up on the topics that interest them rather than recommending particular readings.
Some of the exercises at the end of each chapter put slight twists on concepts in the text while others in troduce new concepts. Answ ers to odd-n u mbered questions are given at the website. I particularly recommend working through the problems for those trying to learn this material without an instructor. Unlike the notes in many books, they are not meant to be skipped, since many of them are important but t angential, and some qualify statements in t he main text. Less important notes supply additional examples or list technical results for reference.
The Level of Mathematics In surveying the prefaces of previous books on game theory, I see that advising readers ho w much mathematical background they need exposes an author to charges of being out of touch with reality. We hope that this is an ingredient not required in large measure, but that it is needed to some degree there can be no doubt.
The reader must be able to accept conditional statem ents, even though he feels the suppositions to be false; he must be willing to make concessions to mathemati- cal simplicity; he must be patient enough to follow along with the peculiar kind of construction that mathematics is; and, abov e all, he must ha ve sympathy with the method — a sympathy based upon his knowledge of its past sucesses in various of the empirical sciences and upon his realization o f the necessity for rigorous deduction in science as we know it.
Mathematics is nonetheless essential. However it is an extremely painful experience for people with simple mind and narrow in terests. Books on information in economics were mainly concerned with decision m aking under uncertainty rather than asymmetric information.
Since the First Edition, a spate of books on game theory has appeared. We have not converged, perhaps because teachers are still converting into books their own independent materials f rom courses not taugh t with texts. For an answer, you must buy this book and read chapter 11 on signalling. But see problem Still the standard text for advanced industrial organization. New York: Norton. A collection o f brief articles on topics in game theory by prominent scholars.
A collection of not-so-brief articles on topics in industrial organization by prominent scholars. Applications of game theory to rate of return regulation. Chur, Switzerland: Harwood Publishers. Out of date by now, but worth reading anyway. By a leading expert on repeated games.
Princeton: Princeton University Press. A discussion of Nash equilibrium and its problems. A book in the tradition of popular science, full of fun examples but with serious ideas too. This has become the standard text for second-year PhD courses in game theory.
Though I hope the students are referring back to Games and Information for help in getting through the hard parts. A model for how to think about organization and management. At an advanced level. A collection of articles by prominent scholars on t opics in game theory.
Lexington, Mass: D. No pain, no gain; but pain and pleasure can be mixed even in the study of mathematics. Princeton: Princeton Uni- versity Press. P erhaps the main competitor to Games and Information. Shorter and less idiosyncratic. An underappreciated book that emphasizes information rather than game theory.
Oxford, Oxford University Press. Largely verbal, very well written, and an example of how clear t hinking and clear writing go together. Varian, Hal, Microeconomic Analysis, Third edition. Varian was the standard PhD micro text when I took the course in The third edition is much bigger, with lots of game theory and information economics concisely presented.
Oxford: Blackwell Publishers. Lots of game t heory as well as I. Focus on game theory, but with applications along the way for illustration. If you like section Detailed and original analysis o f particular models, and much more attention to empirical articles than Krouse, Shy, and Tirole.
A mostly verbal but not easy exposition of game theory using topics such as contracts, procedure, and tort. Indiana University has produced not one but two game theory texts. Not in my library yet.
The usual topics, but with a political science slant, and especially good on things such as utility theory. Whinston and Jerry R. M assive, and a good reference. This book clearly lays out the older approach to game theory, and holds the record for longevit y in game theory books. This actually can be used with Indiana M. Analysis of six cases from business using game theory at the MBA l evel.
Macho-Stadler, Ines and J. Entirely on moral hazard, adverse selection, and signalling. With unusual applications chapters on m acroeconomics, trade policy, and environmental economics and lots of e xercises with answers.
Specialized to a subject of growing importance. Reading, Massachusetts: Addison Wesley, Second edition. A text for undergraduate courses, full of good examples. Just on biology applications. An undergraduate text for game theory, decision theory, auctions, and b argaining, the third game theory text to come out of Indiana.
This book is by and for mathematicians, with surprisingly little overlap between its bibliography and that of the present book. Nicely laid out with color and boldfacing. Game theory plus chapters on bargaining, auctions, vo ting, etc. Detailed verbal explanations of many games.
In the mathematics department tradition, with many exercises and numerical answers. May 12, draft at www-unix. A wonderful book of prob- lems and solutions, with much explanation and special attention to evolutionary biol- ogy. Journal and newspaper articles on game theory and information eco- nomics. Rasmusen, Eric Games and Information. Oxford: Blac kwell Publishers, Fourth edition.
Read on. For answers to even-numbered questions, instructors or others n eeding them for good rea- sons should email me at Erasmuse Indiana. I encourage readers to submit additional homework problems as well as errors and frustrations. They can be sent to me by e-mail at Erasmuse Indiana. Acknowledgements I would like to thank the many people who commented on clarity, suggested topics and references, or found mistakes. Second Edition: Jonathan Berk U. Blackwell supplied anonymous reviewers of superlativ e quality.
Scott F luhr, Pankaj Jain and John Spence provided r esearch assistance and new generations of students in G were invaluable in helping to c larify my writing. In the late s both disciplines and both economies were full of promise, poised for rapid growth and ready to make a profound impact on the world. We all know what happened to the economies of Japan and Argentina. Of the disciplines, econometrics became an inseparable part of economics, while game theory languished as a subdiscipline, interesting to its specialists but ignored by the profession as a whole.
Game theorists took pride i n the diversit y of disciplines to which their theory could be applied, but in none had it become indispensable. In the 1 s, the analogy with Argentina broke down. At the same time that Argentina was inviting back Juan Peron, economists were beginning to discover what they could achieve by combining game theory with the structure of complex economic situations. Innovation in theory and application was especially useful for situations with asymmetric information and a temporal sequence of actions, the two major themes of this book.
During the s, game theory became dramatically more important to mainstream economics. Indeed, it seemed to be swallowing up microeconomics just as econometrics had swallowed up empirical economics.
At the same time, cooperative game theory reached important results in papers by Nash a a nd Shapley b on bargaining games and Gillies and Shapley a on the core.
The new xv topics include auditing games, nuisance suits, recoordination in equilibria, renegotiation in contracts, supermodularity, signal jamming, market microstructure, and government procurement. The discussion of moral hazard has been reorganized.
The total number of chapters has increased by two, the topics of repeated games and entry having been given their own chapters. Changes in the Third Edition, Besides numerous minor changes in wording, I have added new material and reorga- nized some sections of the book.
The new topics are To accommodate the additions, I ha ve dropped 9. These answers are very important, but I have mov ed them to the website because most readers who care to look at them will have web access and problem answers are peculiarly in need of updating. Ideally, I would like to discuss all likely wrong answers as w ell as the right answers, but I learn the wrong answers only slowly, with the help of new generations of students. It includes two sections from chapter 8 8.
Section Topics that hav e been extensively reorganized or rewritten include Section 4. I have recast 1. Every other chapter has also been revised in minor ways. To help with this problem, I ha ve now starred the sections that I think are skippable. For reference, I continue to have xvi those sections close to where the subjects are introduced.
The two most novel features of the book are not contained within its covers. This is available from Blackwell Publishers, and contains scholarly articles, news clippings, and cartoons arranged to correspond with the chapters of the book. I have tried especially to include material that is s omewhat obscure or hard to locate, rather than just a c ollection of classic articles from leading journals.
Part I by itself would be appropriate for a course on game theory, and sections from Part III could be added for illustration. If students are already familiar with basic game theory, Part II can be used for a course on information economics.
The entire book would be useful as a s econdary text for a c ourse on industrial organization. Exercises and notes follow the chapters.
It i s useful to supplemen t a book like this with original articles, but I leave it to m y readers or their instructors to follow up on the topics that interest them rather than recommending particular readings. Some of the exercises at the end of each chapter put slight twists on concepts in the text while others in troduce new concepts.
Answ ers to odd-n u mbered questions are given at the website. I particularly recommend working through the problems for those trying to learn this material without an instructor.
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