''Theory of Games and Economic Behavior'', published in 1944 by
Princeton University Press
Princeton University Press is an independent publisher with close connections to Princeton University. Its mission is to disseminate scholarship within academia and society at large.
The press was founded by Whitney Darrow, with the financial ...
, is a book by
mathematician
A mathematician is someone who uses an extensive knowledge of mathematics in their work, typically to solve mathematical problems. Mathematicians are concerned with numbers, data, quantity, mathematical structure, structure, space, Mathematica ...
John von Neumann
John von Neumann ( ; ; December 28, 1903 – February 8, 1957) was a Hungarian and American mathematician, physicist, computer scientist and engineer. Von Neumann had perhaps the widest coverage of any mathematician of his time, in ...
and
economist
An economist is a professional and practitioner in the social sciences, social science discipline of economics.
The individual may also study, develop, and apply theories and concepts from economics and write about economic policy. Within this ...
Oskar Morgenstern
Oskar Morgenstern (; January 24, 1902 – July 26, 1977) was a German-born economist. In collaboration with mathematician John von Neumann, he is credited with founding the field of game theory and its application to social sciences and strategic ...
which is considered the groundbreaking text that created the interdisciplinary research field of
game theory
Game theory is the study of mathematical models of strategic interactions. It has applications in many fields of social science, and is used extensively in economics, logic, systems science and computer science. Initially, game theory addressed ...
. In the introduction of its 60th anniversary commemorative edition from the Princeton University Press, the book is described as "the classic work upon which modern-day game theory is based."
Overview
The book is based partly on earlier research by von Neumann, published in 1928 under the German title "Zur Theorie der Gesellschaftsspiele" (''"On the Theory of Board Games"'').
The derivation of
expected utility
The expected utility hypothesis is a foundational assumption in mathematical economics concerning decision making under uncertainty. It postulates that rational agents maximize utility, meaning the subjective desirability of their actions. Ratio ...
from its axioms appeared in an appendix to the Second Edition (1947).
Von Neumann and
Morgenstern used objective probabilities, supposing that all the agents had the same probability distribution, as a convenience. However, Neumann and Morgenstern mentioned that a theory of
subjective probability
Bayesian probability ( or ) is an interpretation of the concept of probability, in which, instead of frequency or propensity of some phenomenon, probability is interpreted as reasonable expectation representing a state of knowledge or as quanti ...
could be provided, and this task was completed by
Jimmie Savage in 1954 and
Johann Pfanzagl in 1967. Savage extended von Neumann and Morgenstern's axioms of rational preferences to endogenize probability and make it subjective. He then used
Bayes' theorem
Bayes' theorem (alternatively Bayes' law or Bayes' rule, after Thomas Bayes) gives a mathematical rule for inverting Conditional probability, conditional probabilities, allowing one to find the probability of a cause given its effect. For exampl ...
to update these subject probabilities in light of new information, thus linking rational choice and inference.
Reception
Herbert A. Simon praised the book.
See also
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Commemorative edition of the book ''Theory of Games and Economic Behavior''*
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References
External links
Theory of Games and Economic Behavior full text at archive.org (public domain)
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1944 non-fiction books
Economics books
Books about game theory
Political science books
Sociology books
1944 in economic history
John von Neumann
Princeton University Press books
Collaborative non-fiction books