This preview shows pages 1–3. Sign up to view the full content.
1
THEORY AND EXPERIMENT IN THE ANALYSIS OF STRATEGIC INTERACTION
1
Vincent P. Crawford, University of California, San Diego
One cannot, without empirical evidence, deduce what understandings can be perceived in a
nonzerosum game of maneuver any more than one can prove, by purely formal deduction,
that a particular joke is bound to be funny. Thomas Schelling,
The Strategy of Conflict
1. Introduction
Much of economics has to do with the coordination of independent decisions, and such
questions—with some wellknown exceptions—are inherently gametheoretic. Yet when the
Econometric Society held its First World Congress in 1965, economic theory was almost entirely
nonstrategic and game theory remained largely a branch of mathematics, whose applications in
economics were the work of a few pioneers. As recently as the early 1970s, the profession's view of
gametheoretic modeling was typified by Paul Samuelson's customarily vivid phrase, "the swamp
of nperson game theory"; and even students to whom the swamp seemed a fascinating place
thought carefully before descending from the high ground of perfect competition and monopoly.
The gametheoretic revolution that ensued altered the landscape in ways that would have
been difficult to imagine in 1965, adding so much to our understanding that many questions whose
strategic aspects once made them seem intractable are now considered fit for textbook treatment.
This process was driven by a fruitful dialogue between game theory and economics, in which game
theory supplied a rich language for describing strategic interactions and a set of tools for predicting
their outcomes, and economics contributed questions and intuitions about strategic behavior against
which game theory's methods could be tested and honed. As gametheoretic formulations and
analyses enriched economics, economic applications inspired extensions and refinements of game
theory's methods, transforming game theory from a branch of mathematics with a primarily
normative focus into a powerful tool for positive analysis.
To date this dialogue has consisted mostly of conversations among theorists, with
introspection and casual empiricism the main sources of information about behavior. A typical
exchange proceeds by modeling an economic environment as a noncooperative game; identifying
1
Invited Symposium Lecture at the Econometric Society Seventh World Congress, Tokyo, 1995, reprinted from David
Kreps and Ken Wallis, editors,
Advances in Economics and Econometrics: Theory and Applications, Seventh World
Congress
, Vol. I, New York: Cambridge University Press, 1997. Thanks to John McMillan, Alvin Roth, Joel Sobel,
This preview has intentionally blurred sections. Sign up to view the full version.
View Full Document 2
its equilibria; selecting one using common sense, equilibrium refinements, dynamic arguments, or
convenience; comparing the selected equilibrium with stylized facts and intuitions about outcomes;
and eliminating discrepancies, as far as possible, by adjusting the model or proposing new selection
criteria. The unstated goal of most such analyses has been to predict behavior entirely by theory.
This is the end of the preview. Sign up
to
access the rest of the document.
This note was uploaded on 09/19/2011 for the course ECON 208 taught by Professor Sobel,j during the Spring '08 term at UCSD.
 Spring '08
 Sobel,J
 Game Theory

Click to edit the document details