German economist who has made significant contributions to dynamic game theory and was one of the first to develop game theory as a behavioural study of rational action in close contact with experimental economics in a controlled environment. He shared the Nobel Prize for Economics in 1994 with US mathematician John Nash and US economist John Harsanyi.
A Nash equilibrium in a one-shot non-cooperative game tells us what equilibrium looks like once it is achieved, but it is silent on how it is actually reached. A number of game theorists in the 1970s studied the idea of sequential equilibrium when players have time to learn about each other before reaching critical moves in the game and take account of what their moves will reveal to other players in future moves. Selten's best-known ideas in this burgeoning literature on dynamic game theory are ‘subgame perfection’ and ‘trembling-hand’ equilibria. These notions introduced new concepts of rational behaviour in response to unexpected contingencies of credible threats and promises when players have asymmetric information, and of the minimum size of deviations from rationality that still permit the possibility of equilibrium. In all such cases, Selten showed that equilibrium still means a Nash equilibrium albeit slightly altered.
Selten received his master's degree in mathematics from the Johann-Wolfgang-Goethe-University, Frankfurt in 1957. After working there as an assistant for ten years, he spent a year as a visiting professor at the School of Business Administration of the University of California, Berkeley, before taking up a post at the Free University of Berlin in 1969 where he stayed until 1972. In 1972 he moved to the University of Bielefeld, Western Germany, to establish an institute solely devoted to game theory. In 1984 he likewise created a laboratory in experimental economics at the Rheinische Friedrich-Wilhems-University in Bonn.
His publications include General Equilibrium with Price-Making Firms (1974; with T Marschak), A General Theory of Equilibrium Selection in Games (1988; with J C Harsanyi), and Models of Strategic Rationality, Theory and Decision Library, Series C: Game Theory (1988).
A concept that is used to explain decision-making processes involving political alliances, individuals, and businesses with the goal of conflict...
Born: October 5, 1930, in Breslau, Germany (now Wroclaw, Poland); German; game theory, Nash equilibrium, multistage games, experimental economics, b
THE NASH EQUILIBRIUM is the central equilibrium theory in noncooperative game theory. A Nash equilibrium is an outcome where no individual would...