Three Alternative (?) Stories on the Late 20th-Century Rise of Game Theory

Abstract:     
The paper presents three different reconstructions of the 1980s boom of game theory and its rise to the present status of indispensable tool-box for modern economics. The first story focuses on the Nash refinements literature and on the development of Bayesian games. The second emphasizes the role of antitrust case law, and in particular of the rehabilitation, via game theory, of some traditional antitrust prohibitions and limitations which had been challenged by the Chicago approach. The third story centers on the wealth of issues classifiable under the general headline of "mechanism design" and on the game theoretical tools and methods which have been applied to tackle them. The bottom lines are, first, that the three stories need not be viewed as conflicting, but rather as complementary, and, second, that in all stories a central role has been played by John Harsanyi and Bayesian decision theory.

Keywords: game theory, mechanism design, Nash equilibrium, refinements literature, predatory pricing, antitrust, Chicago School, Bayesian decision theory, Wilson, Hurwicz, Harsanyi

JEL Classifications: B21, B31, C70

Working Paper Series