Game theory

Abstract

We describe noncooperative game models and discuss game theoretic solution concepts. Some applications are also noted. Conventional theory focuses on the question ‘ how will rational players play? ’ , and has the Nash equilibrium at its core. We discuss this concept and its interpretations, as well as re fi nements (perfect and stable equilibria) and relaxations (ration-alizability and correlated equilibria). Motivated by experiments that show systematic theory violations, behavioral game theory aims to integrate insights from psychology to get better answers to the question ‘ how do humans play? ’ . We provide an overview of the observed regularities and brie fl y sketch (beginnings of) theories of boundedly rational play.