Abstract

Eric van Damme outlines the different perspectives on game theory and emphasizes the practical limits of theory based on completely rational individuals. He argues that we will inevitably be forced to consider agents with ‘bounded rationality’ but that does not mean presenting situations that are so simple that even simple individuals can solve them. He asserts that game theory will only become applicable if economists are capable of painstakingly describing the empirical situation they wish to model. Such an approach already recommended by Von Neumann and Morgenstern is far from standard in modern theory.