Methodological Issues

Abstract

Game Theory is the study of multiperson decision problems.¹ Since its beginnings in the early 20^th century and von Neumann’s (1928) proof of the minimax theorem, it has developed rapidly and is now a major field of economic theory. It has become a standard part of major economics textbooks and is the main analysis instrument in some important fields of economics, such as industrial organization, corporate finance and financial intermediation. In spite of this development, in recent years, game theory has faced methodological problems in handling uncertainty and timing decisions in dynamic models. This constitutes a severe limitation for the analysis of strategic issues in financial decision-making, where uncertainty and risk are particularly important.