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Chapter 20: The Genesis of Game Theory and its Role in Industrial Economics
Luca Lambertini 1 Introduction Nowadays, game theory provides the essential analytical instruments that virtually any professional researcher carrying out theoretical research in the social sciences has to master. Furthermore, predictions and normative indications produced by theoretical models based upon game theory represent the basis for policy analysis and applied studies. This is true in particular of economics, and above all of industrial organization, yet the current state of our profession as industrial economists is signiﬁcantly diﬀerent from what it was no more than 20 years, or at most a quarter of a century ago. The work of those who have contributed to build up game theory has changed the way we conceive economics, and therefore also industrial economics and policy, once and for all. The aim of this chapter is to propose a brief outline of the main achievements of static game theory in terms of the main equilibrium concepts, and then proceed to illustrate the route followed by the recent developments of industrial economics. These two elements, in some sense, would represent a standard approach to the matter, and in themselves would contain no particular value added to the state of our knowledge. However, as I hope will become clearer in what follows, this is only a part of the entire story that stems from the early years of game theory. Rather unfortunately, the rest of the story is probably either unknown or, to say the least, unfamiliar to many. This has to do with another ﬁeld...
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