In February, Stanford Economist Robert Wilson was awarded the CME Group-MSRI Prize for his groundbreaking work in game theory. It’s an economic principle that affects our lives every day from our cell phone and electric bill to the gas we put in our car. Contrary to the Economics 101 class we took in high school or college, “It is not supply and demand that magically sets price,” Wilson told us. Game theory also plays a role. So how exactly does game theory work?
The MSRI Prize ceremony attracted several of the world’s top economists, including Nobel Prize winners Alvin Roth (Stanford) and Roger Myerson (University of Chicago), so we decided to ask them about game theory, and explain what it means at an introductory level. Wilson, Roth, Myerson and other economists explain in the video above.