Game theory and Nash equilibrium in industrial organisation: a critical analysis

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The origins and motivations for game theory was given by a question from Aumann in 1985 "What is game theory trying to accomplish?". The interest in strategic games started in 1944 by the publication of the paper of John von Neumann's and Oskar Morgenstern's theory of 'Games and Economic Behaviour'. This paper has contributed to the minimax theorem, introduced by Nicolas Bernoulli in 1713. After the contribution of Borel, who defined pure and mixed strategies mathematically, as well as the minimax solution, von Neumann and his collaborator Morgenstern explained the zero-sum non-cooperative games. In these games, only one player can gain and the other player can only lose. They pointed out 'that playing the maximin strategy is the rational thing to do'.

Extraits

[...] It is remarkable that one single theory can be so effective in modelling such a vast array of observable phenomena; the fact that “this class of models [can take] widely observed behaviour [and] rationalize by reference to a suitably designed game”[44] and make predictions accurately is where the beauty of game theory lies. Critique of Game Theory Game theory is prevalent in the social sciences and as one will soon see, this is clearly unwarranted. According to Rizvi, “Game theoretic predictions even when they are very clear-cut, as for instance in the use of the minimax approach to two-person zero-sum games, have not been confirmed by experiments.”[45] In today's economics, Nash equilibrium is the underpinning to most social sciences, i.e. [...]

[...] Industrial Organization: Practice and Theory. Addison-Wesley, Harlow http://en.wikipedia.org/wiki/Dominant_strategy http://www.u0w.edu.au/arts/sts/bmartin/pubs/78sss.html http://plato.stanford.edu/entries/game-theory Harsanyi J., What is Game Theory Trying to Accomplish? Arrow and Honkaphola, editors Frontiers in Economics Roy Weintraud E., Toward a history of game theory, annual supplement to volume 24, history of political economy, Durham and London 1992, Duke University Press, p.113, “What were von Neumann and Morgenstern trying to accomplish?” by Philip Mirowski Ibid, p.15, The early history of the theory of strategic games from Waldegrave to Borel, Robert W. [...]

[...] & Jensen, E. Industrial Organization: Practice and Theory. p Gul, F. Nobel Prize for Game Theorists” p ibid Ibid. p Rizvi, A. T. “Game Theory to The Rescue?” p Hauenschild, N. & Stahlecker, “Nash-equilibria in a heterogenous oligopoly with fuzzy information” p.165 Waldman, D. & Jensen, E. Industrial Organization: Practice and Theory. [...]

[...] Nobel Prize for Game Theorists: The Contributions of Harsanyi, Nash and Selten” in Journal of Economic Perspectives, Vol No Hargreaves Heap, S. P. & Varoufakis, Y. Game Theory: A Critical Introduction. Routledge, London Harsanyi J. C. “Games with Incomplete Information Played by Bayesian Players” in Management Science, Vol No Harsanyi J., What is Game Theory Trying to Accomplish?, Arrow and Honkaphola, editors Frontiers in Economics Hauenschild, N. & Stahlecker, P. “Nash-equilibria in a heterogenous oligopoly with fuzzy information” in Review of Economic Design. [...]

[...] “Game Theory to The Rescue?” in Contributions to Political Economy. Vol Weintraud R. E., “Toward a history of game theory” in History of Political Economy, Vol Roy Weintraud E., Toward a history of game theory, annual supplement to volume 24, history of political economy, Duke University Press United States of America 1992 Rubinstein, A. “Comments on the Interpretation of Game Theory” in Econometrica. Vol No Sutton, J. “Implementing Game-Theoretic Models in Industrial Economics: Levels of Attack” in Recent developments in the theory of industrial organization. [...]