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6.This idea of using a fixed budget and then applying backward logic is based onresearch by Barry O’Neill, “International Escalation and the Dollar Auction,”Journal of Conflict Resolution30, no. 1 (1986): 33–50.7.A summary of the arguments appears in F. M. Scherer, Industrial MarketStructure and Economic Performance(Chicago: Rand McNally, 1980).
ABOUT THE AUTHORSAVINASH DIXIT is the John J. F. Sherrerd ’52 University Professor of Economics at PrincetonUniversity. Along with Thinking Strategically, he is the author of eight other books, including Gamesof Strategy(with Susan Skeath); Theory of International Trade(with Victor Norman), InvestmentUnder Uncertainty(with Robert Pindyck), The Theory of Equilibrium Growth, and Lawlessnessand Economics: Alternative Modes of Governance.Professor Dixit has won Princeton’s Economics Department teaching prize and the VonNeumann Award from the Budapest University of Economic Science and Public Administration. Heis a Fellow of the National Academy of Sciences, the American Academy of Arts and Sciences, andthe British Academy. He has been president of the Econometric Society (2001) and the AmericanEconomic Association (2008). A graduate of Bombay University and Cambridge University, heearned his doctorate at MIT. He has honorary degrees from the Norwegian School of Economics andBusiness Administration and the University of Warwick.BARRY NALEBUFF is the Milton Steinbach Professor of Economics and Management at YaleSchool of Management. Along with Thinking Strategically, he is the coauthor of Co-opetition(withAdam Brandenburger) and Why Not?(with Ian Ayres).In addition to his academic work, Professor Nalebuff has extensive experience consulting withmultinational firms. He serves on the boards of Nationwide Mutual and is the chairman and co-founder of Honest Tea, one of Inc.magazine’s fastest growing companies in America. A graduate ofMIT, a Rhodes Scholar, and Junior Fellow at the Harvard Society of Fellows, Nalebuff earned hisdoctorate at Oxford University. Avinash was one of his first professors at MIT.
*Pursuing this line led one of us to write a book on this idea; see Adam Brandenburger and Barry J. Nalebuff, Co-opetition(New York: Doubleday, 1996).
*There have also been three Nobel Prizes awarded for work in mechanism design and information economics, both of which are closelyrelated to game theory: in 1996, to William Vickrey and James Mirrlees; in 2001, to George Akerlof, Michael Spence, and Joseph Stiglitzand in 2007, to Leonid Hurwicz, Eric Maskin, and Roger Myerson.
*The technical term for this search strategy is minimizing the entropy.
*Richard would have done well to anticipate the consequences of not paying taxes on his $1 million winnings. On May 16, 2006, he wassentenced to 51 months in prison for tax evasion.
*This strategy no longer applies once there are more than two competitors. Even with three boats, if one boat tacks right and the othertacks left, the leader has to choose which (if either) to follow.
*The Suez Canal is a sea-level passage. The digging was relatively easy since the land was already low-lying and desert. Panama