CentER Discussion Paper No. 2004-42
Posted: 24 Jun 2004
Date Written: 2004
Together with John von Neumann, Oskar Morgenstern wrote The Theory of Games and Economic Behavior, one of the great social science books of the 20th century. The book argues strongly that traditional models and methods are unsuited to develop a general theory of rational behavior, and it proposes an alternative based on game theory. Besides expounding the theory of zero-sum two person games that had earlier been developed by von Neumann, the book contains at least three seminal contributions (the theory of expected utility, the concept of a cooperative game, and the stable set solution concept), and it provides the first applications of game theory to economics and political science. Morgenstern also worked and wrote on economic growth, on predictability of stock prices, on the accuracy of economic observations, and on methodological issues. In this entry, we describe Morgenstern's work and influence, focusing on his work in game theory. For a selection of Morgenstern's writings and a bibliography, I refer to Schotter (1976). For an overview of game theory and for definitions of the technical terms used in this article, the reader is suggested to consult Aumann (1987) or Aumann and Hart (1992-2002).
Keywords: Game theory, cooperative games, Nash equilibrium, noncooperative games, utility theory
JEL Classification: B21, B31, C70
Suggested Citation: Suggested Citation