Game Theory in the Social Sciences - Vol. 2: A Game-Theoretic Approach to Political Economy

9780262691123

0262691124

This companion volume to Game Theory in the Social Sciences: Concepts and Solutionssketches a unification of several branches of political economy on the basis of the theory of games. The book is in five parts. Part I, Basics,discusses the factors that make economic decision making different from properties of economic goods, money, and wealth. Part II, Oligopoly,studies static, one-sided, open models of oligopolistic competition-models in which the selling firms are treated as active players with strategic discretion while the customers are represented by a simpler demand function. The main thesis advanced is that game theory can unify many seemingly diverse approaches to this basic problem. Part III, Cooperative Models of Closed Economic Systems,deals with the relationship between the Edgeworth and other cooperative approaches and the general equilibrium model of a completely closed economy, with both buyers and sellers. Part IV, Strategic Models of Closed Economic Systems,reviews closed models of the economy expressed as games in strategic form and solved using the noncooperative equilibrium solution. Here money and financial institutions emerge as the linking mechanism between the partial equilibrium analysis of the theory of the firm and oligopoly theory and the general equilibrium analysis. Part V, Externalities and Public Goods,explores a number of applications, including land ownership, voting, and the assignment of joint costs. The book concludes with an outline of a series of games within a game as a portrayal of a politicoeconomic process in a democratic society with a two-party system and public and private sectors. The approach adopted points the way toward a possible reconciliation of micro- and macroeconomics and an integration of economic, political, and sociological descriptions in the study of the short-term functioning of the state.