Game Theory Unlocks Secrets of Strategic Decision-Making
The document introduces game theory to practical economists, covering different types of games and how to solve them. It divides games into static or dynamic and complete or incomplete information types. The solutions discussed are Nash equilibrium for static complete information games, backwards induction for dynamic complete information games, Bayesian Nash equilibrium for static incomplete information games, and perfect Bayesian equilibrium for dynamic incomplete information games. The main idea emphasized is that as games become more complex, stronger solution concepts are needed to avoid unrealistic outcomes. In simpler games, simpler solutions work fine, but richer games require stronger solutions to weed out implausible equilibria.