Creator: Bryant, John B. Series: Working paper (Federal Reserve Bank of Minneapolis. Research Dept.) Number: 149 Abstract:
Game theory addresses a problem which is central to economics. Yet, according to the folklore of economics, game theory has failed. This paper argues that this is an incorrect interpretation of the game theory literature. When faced with a well-posed problem, game theory provides a solution. Procedures for facing game theory with well-posed problems are suggested, and examples of economic applications provided. The applications are Samuelson's fiat money model, Phelps' capital overaccumulation problem, multiple rational expectations equilibria, and a bargaining problem.
Keyword: Competitive equilibrium, Minimax-Nash, and Nash equilibrium Subject (JEL): C72 - Game theory and bargaining theory - Noncooperative games