Economic Applications of Game Theory
I’m new to game theory
Begin with MIT’s introductory course, which presents fundamental game-theory tools and applies them to examples.
Start with: Economic Applications of Game Theory
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Game Theory
Learn how mathematical models describe strategic choices, information, timing, and cooperation.
For: Learners at different starting points, including people interested in mathematics, economics, engineering, or political science.
After this page you can: Represent a strategic situation as a game, identify a relevant solution concept, and explain what its result does and does not imply.
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Part of: Mathematics
About Game Theory
Game theory is the mathematical analysis of strategic interaction: situations in which one person’s best decision depends on the decisions of others. A game model can specify its players, their available strategies, their preferences over outcomes, and the information and sequence of play. Applications include voting, bargaining, auctions, and political competition.
Study often begins by representing a situation in normal form, then checking candidate outcomes using a solution concept such as Nash equilibrium. From there, learners can explore randomization, sequential or repeated play, incomplete information, and cooperative solution concepts. The model and solution concept should fit the features of the situation being analyzed.
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Game Theory: Lecture Notes
I know the basics and want a broader map
Use MIT’s lecture materials to revisit strategic-form, Bayesian, extensive-form, and repeated games.
Start with: Game Theory: Lecture Notes
Game Theory
I have a specific application in mind
Browse MIT’s course readings for topics including auctions, signaling, and bargaining.
Start with: Game Theory
Learn the foundations
1.Strategic-form games and equilibriumA normal-form game specifies players’ strategy spaces and payoff functions.
A normal-form game specifies players’ strategy spaces and payoff functions. Nash equilibrium describes a profile in which no player can increase their utility by unilaterally deviating while others keep their strategies.
- Games in Strategic Form and Nash Equilibrium
The reading list includes a chapter on normal-form games and Nash equilibrium.
Nash equilibrium
A profile in which no player can increase their utility by unilaterally deviating while others keep their strategies.
Try it
If every player’s choice is a best response to the other players’ choices, does the profile satisfy the Nash-equilibrium condition?
Yes. No player can improve by changing their choice alone while the others’ choices stay fixed.
2.Randomization and dominanceMixed strategies let players assign probabilities to actions.
Mixed strategies let players assign probabilities to actions. Cornell’s chapter uses rock-paper-scissors to illustrate a game without a pure-strategy Nash equilibrium.
- A Course in Networks and Markets: Game-theoretic Models and Reasoning
The open chapter discusses mixed-strategy equilibrium and rock-paper-scissors.
Try it
In rock-paper-scissors, why might a player randomize instead of always choosing rock?
A fixed choice can be answered by a choice that beats it; randomizing over actions avoids always making the same choice.
3.Sequential and repeated gamesExtensive-form games represent multi-stage play, and backward induction and subgame perfection are solution topics for dynamic games.
Extensive-form games represent multi-stage play, and backward induction and subgame perfection are solution topics for dynamic games. MIT’s materials also cover repeated games.
- Game Theory: Lecture Notes
The notes page lists materials on extensive-form games, subgame perfection, and repeated games.
Extensive-form game
A game representation used for multi-stage or sequential games.
Subgame perfection
An equilibrium topic associated with extensive-form and dynamic games.
Try it
A player threatens to take an action later that would hurt both them and their opponent. What should you check before treating the threat as credible?
Check whether the threatened action fits the player’s incentives at the later decision point; dynamic-game analysis includes reasoning about later stages.
4.Incomplete information and cooperationGame theory studies static and dynamic games of incomplete information, including signaling games.
Game theory studies static and dynamic games of incomplete information, including signaling games. Cooperative game theory also has solution concepts such as the core and Shapley value.
- Game Theory
The course description names the core and Shapley value among cooperative solution concepts.
Try it
If players have incomplete information, name one game-theory topic that may help organize the analysis.
A Bayesian Nash equilibrium is one relevant concept; signaling games are another topic for dynamic games of incomplete information.
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Books
- Theory of Games and Economic Behavior
Theory of Games and Economic Behavior
John von Neumann and Oskar Morgenstern · 2007
The 60th anniversary edition offers a way to read that foundational work in a later edition.
- Game Theory
Game Theory
Drew Fudenberg and Jean Tirole · 1991
The Stanford Encyclopedia describes it as a particularly thorough mathematical treatment; MIT OpenCourseWare recommends it for a graduate game theory course.
- The Strategy of Conflict
The Strategy of Conflict
Thomas C. Schelling · 2006
A political science syllabus assigns the book’s first five chapters in its bargaining unit.
- Games of Strategy
Games of Strategy
Avinash K. Dixit, Susan Skeath, and David McAdams · 2020
The Stanford Encyclopedia describes the textbook as covering all the main branches and recommends it to students new to the field.
- A Course in Game Theory
A Course in Game Theory
Martin J. Osborne and Ariel Rubinstein · 1994
MIT OpenCourseWare lists it as a useful graduate-level game theory reference.
- Evolution and the Theory of Games
Evolution and the Theory of Games
John Maynard Smith · 1982
The Stanford Encyclopedia identifies the book as the explicit origin of evolutionary game theory.
Every free Game Theory course and book on RedLectern
Free Game Theory online courses
- Economic Applications of Game TheoryMIT 14.12 · Browse materials · Video
- Game TheoryMIT 14.126 · Browse materials
- Game TheoryMIT 17.810 · Browse materials
- Game Theory for ManagersMIT 15.040 · Browse materials
- Game Theory for Strategic AdvantageMIT 15.025 · Browse materials
- Game Theory with Engineering ApplicationsMIT 6.254 · Browse materials
- Mathematical StatisticsMIT 18.655 · Browse materials
- Microeconomic Theory IIMIT 14.122 · Browse materials
Show all 14 coursesShow fewer courses
- Microeconomic Theory IIIMIT 14.123 · Browse materials
- Strategy and InformationMIT 14.16 · Browse materials
- Topics in Game TheoryMIT 14.147 · Browse materials
- Topics in Game TheoryMIT 14.147 · Browse materials
- Decisions, Games, and Rational ChoiceMIT 24.222 · Open on OCW
- Game TheoryMIT 14.126 · Open on OCW
How these courses are chosen
Listed as Game Theory courses:
- those whose title contains “Game Theory”, or
- those tagged “Game Theory” as one of at most 2 topic tags, or as the first of 3.
Free Game Theory textbooks and books
- Martin J. Osborne · Read at books.osborne.economics.utoronto.ca ↗ · Cited by 1 MIT course
- Noam Nisan · Read at www.cs.cornell.edu ↗ · Cited by 1 MIT course
- Thomas S. Ferguson · Read at www.math.ucla.edu ↗
- Anna R. Karlin · Read at homes.cs.washington.edu ↗
- Giacomo Bonanno · Read at arxiv.org ↗
- Vincent Knight · Read at vknight.org ↗
- Eric Rasmusen · Read at www.rasmusen.org ↗
- Jennifer Firkins Nordstrom · Read at open.umn.edu ↗