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Game Theory in Economics

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Atheist posted on Fri, Jul 30 2010 6:48 PM

I was wondering if game theory is used by free marketers?

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mwalsh replied on Fri, Jul 30 2010 6:51 PM

I know we used it in the AP econ, to illustrate mathematically, with "concret" numbers oligopilies and what would happen with collusion, and to illustrate why they would want to "cheat".  The only thing is that the teacher then said that if they kept doing this repeatedly and seeing the losses, they "should" stop cheating and would successfully collude...

"To the optimist, the glass is half full. To the pessimist, the glass is half empty. To the engineer, the glass is twice as big as it needs to be." - Unknown
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Suggested by Jon Irenicus

Game theory is increasingly getting better*. For example, they model learning effects (rather than assume equilibrium). They still assume neoclassical "rationality" though.

I think research on "market" outcomes with regards to voting are a good example of where game theory is at. The boundaries are still set (laws), but within that framework the models allow for a lot of decentralization/chaos.

* I am basing this post on the game theory I had in college and a friend of mine doing a phd on rational voting (ahum). Maybe there are areas I overlook though...

The older I get, the less I know.
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Hell yes!

Of course, you'll need to study neoclassical economists instead...

"I'm not a fan of Murray Rothbard." -- David D. Friedman

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