Game-theoretic and Monopolistic Competition Analyses

Abstract

Because of the similarity of methodology, analytical goals and/or substantive content, two bodies of analysis must be compared with the rivalrous consonance approach of this book. Game theory is a well-developed body of techniques designed for a wide range of interdependence environments which has become the mainstream approach to oligopoly analysis in both microeconomic theory and industrial organization. It is distinguished by the devotion of many of the best theoretical analysts in economics, and outside the circle of this clerisy by that of a worshipful, if frequently uncomprehending, laity. Its devotees, in incautious moments, can be truly hegemonic in defining its relevance; Tirole (1993, p. 207), for example, asserts that “most problems of industrial organization can be solved with a handful of basic game-theoretic concepts.” He is speaking at this point about conceptual problems in the scholarly field rather than empirical complexity, but even at the abstract level the assertion exudes excessive confidence.