Complements to the Axiomatic Method in Economic Design

Abstract

In this chapter I discuss how the axiomatic approach to economic design can be complemented with other approaches, in particular by invoking concepts and techniques of the two main branches of game theory, the cooperative branch and the non-cooperative branch. There’re several types of cooperative games, and I review the central ones. I briefly comment on the role of mathematics and on how experimental work and philosophy can help in our design endeavor. One is that it’s about conflictual situations—what we call a game is a formal representation of such a situation. It’s about understanding both how people handle conflicts on their own and also about helping them come up with satisfactory resolutions of conflicts; and a central objective of economic design is to find compromises between outcomes that people value differently.