Game Theory and Its Uses

Most of us like games and most of us play games. Our games may be simple (a game of ‘snap’) or they may be complex (a game of chess). In recent years, economists have come to see this aspect of our human behaviour as increasingly helpful in viewing and understanding a considerable range of economic behaviour. It is the purpose of this chapter to introduce some of the important aspects of this theory of games and to review some of the possible applications of the theory. The theory has usually been applied within the area of firms’ behaviour, but the chapter will demonstrate that there may be many other valid applications of the approach.