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Theory of Games and Economic Behavior

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This is the classic work upon which modern-day game theory is based. What began more than sixty years ago as a modest proposal that a mathematician and an economist write a short paper together blossomed, in 1944, when Princeton University Press published Theory of Games and Economic Behavior . In it, John von Neumann and Oskar Morgenstern conceived a groundbreaking mathematical theory of economic and social organization, based on a theory of games of strategy. Not only would this revolutionize economics, but the entirely new field of scientific inquiry it yielded--game theory--has since been widely used to analyze a host of real-world phenomena from arms races to optimal policy choices of presidential candidates, from vaccination policy to major league baseball salary negotiations. And it is today established throughout both the social sciences and a wide range of other sciences.

This sixtieth anniversary edition includes not only the original text but also an introduction by Harold Kuhn, an afterword by Ariel Rubinstein, and reviews and articles on the book that appeared at the time of its original publication in the New York Times , tthe American Economic Review , and a variety of other publications. Together, these writings provide readers a matchless opportunity to more fully appreciate a work whose influence will yet resound for generations to come.

776 pages, Paperback

First published January 1, 1944

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About the author

John von Neumann

67 books290 followers
John von Neumann (Hungarian: margittai Neumann János Lajos) was a Hungarian American[1] mathematician who made major contributions to a vast range of fields,[2] including set theory, functional analysis, quantum mechanics, ergodic theory, continuous geometry, economics and game theory, computer science, numerical analysis, hydrodynamics (of explosions), and statistics, as well as many other mathematical fields. He is generally regarded as one of the foremost mathematicians of the 20th century. The mathematician Jean Dieudonné called von Neumann "the last of the great mathematicians." Even in Budapest, in the time that produced Szilárd (1898), Wigner (1902), and Teller (1908) his brilliance stood out. Most notably, von Neumann was a pioneer of the application of operator theory to quantum mechanics, a principal member of the Manhattan Project and the Institute for Advanced Study in Princeton (as one of the few originally appointed), and a key figure in the development of game theory and the concepts of cellular automata and the universal constructor. Along with Edward Teller and Stanislaw Ulam, von Neumann worked out key steps in the nuclear physics involved in thermonuclear reactions and the hydrogen bomb.

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Displaying 1 - 18 of 18 reviews
Profile Image for Steve.
380 reviews1 follower
November 11, 2018
When I was in junior high school, I remember coming across this volume in the stacks of the local public library, being captivated by the prospect of having a leg up on others in games. Backgammon, anyone? The pages seemed very adult, with runic symbols and equations. I really wanted to know what those pages meant. One day, I thought.

Fast forward some 40+ years. I finally got around to paging through the Theory of Games and Economic Behavior with mental props from a career in finance and two Ivy League degrees, from which come the faint background radiated memories of calculus, differential equations, decision science and statistics.

And still, the work of Messrs. von Neumann and Morgenstern presents great difficulty to understanding. I now believe I can put my arms around their framework, their general approach and simplifications, which is a big step forward. The object is to maximize utility of the whole when presented with individual utilities. I must say that the work's presentation rests, for the most part, in logic and rather common algebra and geometry; yet, could it have been expressed in a more indecipherable way?

It would be interesting to read a translation of this volume into our vernacular, recasting the language and mathematics through the lens of simplicity. Anyone care to take up that task?

1 star for quality of writing/presentation, 5 stars for brainpower/contribution to academia = 3 stars overall
Profile Image for Lieb.
3 reviews
May 30, 2008
Modern Game Theory is difficult and this is the first book on the subject so you are already starting with quite a hill to climb. The authors don't make it any easier by using convoluted descriptions and poorly structured examples to present their excellent ideas. I gave this book a low review purely on the quality of the writing. Game Theory is an important subject and we are indebted to von Neumann and Morgenstern for formulating the concepts but unfortunately they were not able to present their ideas in a clear way. Check out http://www.goodreads.com/book/show/79... for a much better introduction to Game Theory.
Profile Image for William Schram.
1,799 reviews74 followers
February 13, 2022
The Theory of Games and Economic Behavior, written by John von Neumann and Oskar Morgenstern in 1944, is a seminal work of Game Theory.

Professors von Neumann and Morgenstern build Game Theory from the ground up. They explore the results of certain actions and use those to predict the optimal play at any given moment. Along the way, von Neumann discusses his love of Poker and Chess. Through these seemingly unrelated topics, the authors eventually get to economics.

I read this book on a Kindle, and it worked out well enough. There were minor typos throughout the text, but not enough to be distracting. Thanks for reading my review, and see you next time.
Profile Image for Tyler.
69 reviews21 followers
May 19, 2019
A fascinating book. I will revisit it later on in my life for sure, but for what I did grasp I thought this book to be highly informative, and extremely impressive. This was an eye-opening experience. Watching Von Neumann and Morgenstern flip between mathematics and verbal explanation was impressive, and seeing the results of mathematical experiments and interpretations was breath taking. My favorite part was the applications of acyclicity. If you have a problem with the axiomization of numerical utility, he lays it all out immediately upon beginning the work, which is the foundation upon which it rests. He obviously concludes this explanation by simply stating that without a numerical, and in some cases integral, value of utility, some sociological/psychological observations are impossible and therefore his method of effective triangles explains human behavior in situations of exchange much better than indifference curve analysis.

This is a big recommend to any mathematician or Game Theorist, or even any computer scientist. Because hey, this all has applications within various avenues of scientific and mathematical thought.
Profile Image for Pritam Chattopadhyay.
1,855 reviews164 followers
January 7, 2022
‘The game theorist reading this book does not need another lecture on the importance of the book and the development of game theory. Very few other books in economics have been as highly praised and influential. Only a handful of topics have received as much attention or been surveyed as intensively in contemporary economics as game theory. The reader of the book who is not a scholar of game theory, and is interested in catching up with the development of the discipline since the book was published, can choose from a number of excellent introductory books. They are written in a variety of styles and levels of mathematical sophistication and are directed at laypersons as well as scholars of economics, law, political science, management theory, mathematics, and biology…’ ARIEL RUBINSTEIN

Game Theory was originally propagated by John von Neumann and Oskar Morgenstern in their work, ‘Theory of Games and Economic Behaviour,’° to deal with economic problems. They expounded ‘the mathematics of probability and of decisional sequences’ under ‘conditions of complete information’)’

It has been applied to international politics by Morton Kaplan and Thomas Schelling.

The period of the late ’40s and early ’50s was a period of excitement in game theory. The discipline had broken out of its cocoon and was testing its wings.

Giants walked the earth.

At Princeton, John Nash laid the groundwork for the general non-cooperative theory and for cooperative bargaining theory.

Lloyd Shapley defined a value for coalitional games, initiated the theory of stochastic games, coinvented the core with D. B. Gillies, and together with John Milnor developed the first game models with an infinite number of players.

Harold Kuhn reformulated the extensive form and introduced the concepts of performance strategies and perfect recall. A. W. Tucker invented the story of the Prisoner’s Dilemma, which has entered popular culture as a crucial example of the interaction between competition and cooperation.

It is important to recognize that the results that Aumann enumerated did not respond to some suggestion of von Neumann; rather they were new ideas that ran counter to von Neumann’s preferred version of the theory.

In almost every instance, it was a repair of some inadequacy of the theory as presented in the TGEB.

Indeed, von Neumann and Morgenstern criticized Nash’s non-cooperative theory on a number of occasions. In the case of the extensive form, the book contains the claim that it was impossible to give a useful geometric formulation.

Thus, game theory was very much a work in progress, in spite of von Neumann’s opinion that the book contained a rather complete theory. Through the efforts at RAND and at Princeton University, many new directions of research had been opened and the way had been paved for the applications to come.

The game theory has been defined as ‘a body of thought dealing with rational decision strategies in situations of conflict and competition, when each participant or player seeks to maximise gains and minimize losses”.

It is a mathematical model in which the player is placed in a certain fixed situation and tries to make maximum gains out of his opponents.

The situations visualised are of four kinds:

(1) zero-sum two persons games;
(2) non-zero-sum two persons games;
(3) zero-sum n-persons games; and
(4) non-zero-sum n-persons games.

In situation (1) the gain of one is equal to the loss of the other. In (2) and (3) the outcome is shared and the losses of one are not necessarily equal to the gains of another.

In (4) the situation is tremendously multifarious and the gains and losses are shared by both sides to some extent.

There are definite assumptions and rules of the game. The assumptions are that the players are guided by rational behaviour and choose the best course of action that brings them maximum gains.

The rules are that the equation between the players is straight and the losses of one are the gains of another. The theory is built up with the help of five important conceptions: strategy, opponent, pay-off, rules and information. Players are engaged in choosing alternatives which can be used in the future situations. These are known as the outcomes.

The full ranges of possible outcomes are prospects. The gain and loss result of prospects is pay-off which is maximum when one wins, second- best when the game is drawn and third-best when it is lost.

Just as rationality in the behaviour of a player is assumed, his ability to make maximum gains by designing the best strategies is also taken for granted.

The theory is highly abstract and works only under assumed conditions. The players are rarely as rational as presumed by this theory.

The theory can be applied with some success only to cases of two- person zero-sum games, but, as Morton Kaplan has pointed out, there are few such situations in real life and the theory ‘has only limited applicability to most problems of international politics’.

One of the reasons for its limited applicability has been suggested by Karl W. Deutsch — ‘Game Theory usually assumes that most games have an end but international politics is rather an unending game in which no great power can pick up its marbles and go home’.
Profile Image for Psychön von Reznhör.
18 reviews51 followers
February 26, 2021
"The aim of this book lies not in the direction of empirical research. The advancement of that side of economic science, on anything like the scale which was recognized above as necessary, is clearly a task of vast proportions. It may be hoped that as a result of the improvements of scientific technique and of experience gained in other fields, the development of descriptive economics will not take as much time as the comparison with astronomy would suggest. But in any case the task seems to transcend the limits of any individually planned program."
Profile Image for Leonardo.
Author 1 book64 followers
Shelved as 'to-keep-reference'
March 8, 2022
Theory of Games and Economic Behavior, escrita en 1944 por John von Neumann y Oskar Morgenstern, donde se explicitan los axiomas de lo que hoy se conoce como Teoría de la Utilidad Esperada (EUT).

Ensayos sobre Racionalidad en Economía
Profile Image for Elxan.
3 reviews2 followers
December 24, 2017
More than a book. Simply, this theory improves logical thinking and analyses abilities which changed the modern world history/science/industry since WW2
32 reviews
December 22, 2019
I think every self-respecting researcher needs to have this classic...
Profile Image for Sai Luo.
9 reviews
January 16, 2020
The first book systematically developed the concept of game theory. But it's content is not much used.
July 25, 2022
This book proved far too theoretical to benefit someone who was looking for info on best approaches to gamification or creating new games. It included some concepts but mostly mathematical proofs.
8 reviews1 follower
January 13, 2019
Extremely challenging to read if you are not rather far along in your math career. I am a math major myself and found it quite confusing from the very beginning. I did not thoroughly understand how they proved that utility was a linear transformation always. It was also hard to keep track of all the variables when going through the proofs etc. This reads like an academic research paper (it kind of is) and so unless you are, as I suggested, far along in your math career, I do not recommend it. I just finished Linear Algebra to give an idea of my current mathematical understanding.

It likely is an excellent book, but I would not know and the majority will not either. I would recommend The Art of Strategy by Dixit and some other guy if you want an intro to Game Theory.
Profile Image for Alexander Curran.
Author 6 books466 followers
May 9, 2018
A complex and predicative book detailing game theory and economical activity/progression.
Displaying 1 - 18 of 18 reviews

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