1. The Achievements and the Future of Game Theory: A User's Perspective
Avinash Dixit
Princeton University

2. Summary overview
Some game-theoretic applications were analyzed implicitly for a long time.
Game theory is now the dominant mode of thinking in most of economics, and increasing in other social sciences.
There is a continuum from abstract theory to its uses, with feedback and contributions in both directions.

3. Previous implicitly game theoretic literature
Cournot, Bertrand examples of Nash eq
Edgeworth – shrinking contract curve
Social choice theory
Arrow, Sen
International economics
Johnson et al (tariff wars)
Information economics
Akerlof, Spence, Stiglitz

4. Increasingly explicit game theoretic formulations
Gradual developments in 1960s and 70s:
Debreu-Scarf (cooperative game)
Wilson on auctions
Hurwicz, Gibbard et al implementation
Nash bargaining solution in labor
Extensive form bargaining, Rubinstein etc.
More in specific fields to follow

5. Microeconomics / IO More general, richer view of competition
Many dimensions of competition strategy
These other variables are not just shifters of demand and cost curves!
Perfect competition is not price-taking, but “expected-utility-taking”
Max { E[Π] | E[U]  U*}, = 0 by entry
yields Max { E[U] | E[Π]  0} = U*

6. Industrial organization
Repeated games
Implicit collusion, chain-store paradox
Feedback on theory – Abreu-Pearce-Stacchetti etc.
Two-stage games
Location and price competition
Entry deterrence
Commitment (Spence, Dixit)
Private information (Milgrom-Roberts)
Feedback on theory - refinements

7. Labor economics Bargaining (applications in many fields) Search theory
Raiffa – Art and Science of Negotiation
Search theory
“Decisions” aspect of Luce and Raiffa
Matching theory and applications
Gale-Shapley, Roth et al
Most of this field is empirical
Game theorists can try to use the rich data

8. Macro and public economics
Games with one large player (govt) and many small players (private sector)
Mechanism design in taxation (Mirrlees) regulation (Baron-Myerson)
Dynamic inconsistency, optimal policies with and without commitment, relation to perfectness. Role of delegation

9. International Economics
Strategic trade policy
Two-stage games of governments & firms
Trade liberalization agreements
Self-enforcement constraints
Need for multilateral enforcement
Monetary and fiscal cooperation
Decision-making in common central bank
Intraction with national fiscal authorities

10. Political economy Strategic voting, agenda manipulation Delegation
May not be realistic in mass elections
But important in committees, legislatures
Rich data allows testing, estimation
Delegation
Why? Information acquisition
Limits – Agency problems
How – Mechanism design
Power indexes
Shapley-Shubik, Banzhaf

11. Institutions
Attaining mutually preferred social outcomes as equilibria of individual behavior
Formal (law) not perfect
Non-governmental, self-enforcing, enforcement by third parties
Creating focal points for assurance games
Resolving prisoners’ dilemmas by
Information collection and dissemination
Enforcing good behavior: norms and sanctions

12. Order without law

13. Law without order

14. The next 50 years? Behavioral decision and game theory
Comparing findings from lab and field, pinpointing the right mix in each context
Degrees of credibility
Can this be handled in Harsanyi model
Games without common knowledge
Incomplete awareness

15. Basic research is a never-ending process
“Grook” by Piet Hein
Problems worthy of attack
Prove their worth
by hitting back