Game theory now provides the theoretical underpinning for a multitude of courses in economics worldwide. The speed of these developments has been remarkable and they have constituted something of a revolution. Indeed, the basic tenets of game theory have now begun to colonize other social sciences and its proponents have been unified in claiming its natural basis as a rational theory of society.
But the technical demands of the subject and the lack of clarity of many commentators' explanations have been a problem for many. This second edition of Shaun Hargreaves-Heap and Yanis Varoufakis's classic text strips away the mystique and lets the student make his or her own mind up. This new edition:
* lays bear the philosophy behind game theory and explains all its major concepts
* conducts a clear explanation and careful analysis of all the main 'games', such as repeated games and the prisoner's dilemma, as well as less well-trodden topics such as experimental games and issues of rationality
* introduces and analyses new areas of game theory such as "evolutionary games" and "Psychological games"
Retaining the most popular features from the original edition, this latest version offers improved pedagogy, new questions for discussion, new chapters on the latest developments as well as a host of new examples. A new generation of students of game theory will grow to appreciate this superb text whilst fans of the first edition will eagerly devour this long-awaited update.

Contents:
1. Overview 1.1 Introduction 1.1.1 Why Study Game Theory? 1.1.2 What is Game Theory? 1.1.3 Why this Book? 1.1.4 Why a Second Edition? 1.2 The Assumptions of Game Theory 1.2.1 Individual Action is Instrumentally Rational 1.2.2 Common Knowledge of Rationality 1.2.3 Common Priors 1.2.4 Action Within the Rules of the Game 1.3 Liberal Individualism, The State and Game Theory 1.3.1 Methodological Individualism 1.3.2 Game Theory's Contribution to Liberal Individualism 1.4 A Guide to the Rest of the Book 1.4.1 Three Classic Games: Hawk-Dove, Co-ordination and the Prisoner's Dilemma 1.4.2 Chapter-by-Chapter Guide 1.5 Conclusion 2. The Elements of Game Theory 2.1 Introduction 2.2 The Representation of Strategies, Games and Information Sets 2.2.1 Pure and Mixed Strategies 2.2.2 The Normal Form, the Extensive Form and the Information Set 2.3 Dominance Reasoning 2.3.1 Strict and Weak Dominance 2.3.2 Degrees of Common Knowledge of Instrumental Rationality 2.4 Rationalisable Beliefs and Actions 2.4.1 The Successive Elimination of Strategically Inferior Moves 2.4.2 Rationalisable Strategies and their Connection with Nash's Equilibrium 2.5 Nash Equilibrium 2.5.1 John Nash's Beautiful Idea 2.5.2 Consistently Aligned Beliefs, the Hidden Principle of Rational Determinacy and the Harsanyi-Aumann Doctrine 2.5.3 Some Objections to Nash: Part I 2.6 Nash Equilibrium in Mixed Strategies 2.6.1 The Scope and Derivation of Nash Equilibria in Mixed Strategies 2.6.2 The Reliance of NEMS on CAB and the Harsanyi Doctrine 2.6.3 Aumann's Defence of CAB and NEMS 2.7 Conclusion 3. Battling Indeterminacy - Refinements of Nash's Equilibrium in Static and Dynamic Games 3.1 Introduction 3.2 The Stability of Nash Equilibria 3.2.1 Trembling Hand Perfect Nash Equilibria 3.2.2 Harsanyi's Bayesian Nash Equilibria and his Defence of NEMS 3.3 Dynamic Games 3.3.1 Extensive Form and Backward Induction 3.3.2 Subgame Perfection, Nash and CKR 3.3.3 Sequential Equilibria 3.3.4 Bayesian Learning, Sequential Equilibrium and the Importance of Reputation 3.3.5 Signalling Equilibria 3.4 Further Refinements 3.4.2 Forward Induction 3.5 Some Logical Objections to Nash, Part III 3.5.1 A Critique of Subgame Perfection 3.5.2 A Negative Rejoinder (based on the Harsanyi-Aumann Doctrine) 3.5.3 A Positive Rejoinder (based on Sequential Equilibrium) 3.5.4 Conclusion: Out-of-Equilibrium Beliefs, Patterned Trembles and Consistency 3.6 Conclusion 3.6.1 The Status of Nash and Nash Refinements 3.6.2 In Defence of Nash 3.6.3 Why has Game Theory been Attracted 'so Uncritically' to Nash? 4. Bargaining Games- Rational Agreements, Bargaining Power and the Social Contract 4.1 Introduction 4.2 Credible and Incredible Talk in Simple Bargaining Games 4.3 John Nash's Generic Bargaining Problem and his Solution 4.3.1 The Bargaining Problem 4.3.2 Nash's Solution as an Equilibrium of Fear 4.3.3 Nash's Solution - An Example 4.3.4 Nash's Axiomatic Account 4.3.5 Do the Axioms Apply? 4.3.6 Nash's Solution - a Summary 4.4 Ariel Rubinstein and the Bargaining Process: The Return of Nash Backward Induction 4.4.1 Rubinstein's Solution to the Bargaining Problem 4.4.2 A Proof of Rubinstein's Theorem 4.4.3 The (Trembling Hand) Defence of Rubinstein's Solution 4.4.4 A Final Word on Nash, Trembling Hands and Rubinstein's Bargaining Solution 4.5 Justice in Political and Moral Philosophy 4.5.1 The Negative Result and the Opening to Rawls and Nozick 4.5.2 Procedures and Outcomes (or 'Means' and Ends) and Axiomatic Bargaining Theory 4.6 Conclusion 5. The Prisoner's Dilemma - The Riddle of Co-operation and its Implications for Collective Agency 5.1 Introduction: The State and the Game that Popularised Game Theory 5.2 Examples of Hidden Prisoner's Dilemmas and Free Riders in Social Life 5.3 Some Evidence on How People Play the Game 5.4 Explaining Co-operation 5.4.1 Kant and Morality: Is it Rational to Defect? 5.4.2 Altruism 5.4.3 Inequality Aversion 5.4.4 Choosing a Co-operative Dsposition Instrumentally 5.5 Conditional Co-operation in Repeated Prisoner's Dilemmas 5.5.1 Tit-for-Tat in Axelrod's Tournaments 5.5.2 Tit-for-Tat as a Nash Equilibrium Strategy When the Horizon is Unknown 5.5.3 Spontaneous Public Good Provision 5.5.4 The Folk Theorem, Indeterminacy and the State 5.5.5 Does a Finite Horizon Wreck Co-operation? The Theory and the Evidence 5.6 Conclusion: Co-operation and the State in Liberal Theory 5.6.1 Rational Co-operation? 5.6.2 Liberalism and the prisoners' dilemma 5.6.3 The limits of the prisoners' dilemma 6. Evolutionary Games - Evolution, Games and Social Theory 6.1 Game Theory's Encounter with Evolutionary Biology 6.1.1 The Origins of Evolutionary Game Theory 6.1.2 Evolutionary stability and equilibrium: An introduction 6.1.3 Spontaneous Order Versus Political Rationalism 6.2 Symmetrical Evolution in Homogenous Populations 6.2.1 Static Games 6.2.1 Dynamic Games 6.3 Evolution in Heterogeneous Populations 6.3.1 Asymmetrical (or two-dimensional) Evolution and the Demise of Nash Equilibria in Mixed Strategies (NEMS) 6.3.2 Does Evolutionary Game Theory Apply to Humans as well as it does to Birds, Ants, etc.? An Experiment with 2-Dimensional Evolution in the Hawk-Dove Game 6.3.3 Multi-Dimensional Evolution and the Conflict of Conventions 6.3.4 The Origin of Conventions and the Challenge to MethodologicalIndividualism 6.3.5 The Politics of Mutations: Conventions, Inequality and Revolt 6.3.6 Discriminatory Conventions: A Brief Synopsis 6.4 Social Evolution: Power, Morality and History 6.4.1 Social Versus Natural Selection 6.4.2 Conventions as Covert Social Power 6.4.3 The Evolution of Predictions into Moral Beliefs: Hume on Morality 6.4.4 Gender, Class and Functionalism 6.4.5 The Evolution of Predictions into Ideology: Marx against Morality 6.5 Conclusion 7. Psychological Games - Demolishing the Divide between Motives and Beliefs 7.1 Introduction 7.2 Different Kinds of 'Other Regarding' Motives 7.2.1 The 'Other'-Regarding Motives of Homo Economicus 7.2.2 Beliefs as Predictions and as Motives 7.3 The Motivating Power of Normative Beliefs 7.3.1 Fairness Equilibria 7.3.2 Computing Fairness Equilibria 7.3.3 Assessing Rabin 7.3.4 An Alternative Formulation Linking Entitlements to Intentions 7.3.5 Team Thinking 7.4 Psychology and Evolution 7.4.1 On the Origins of Normative Beliefs: An Adaptation to Experience 7.4.2 On the Origins of Normative Beliefs: The Resentment-Aversion Versus the Subversion-Proclivity Hypotheses 7.5 Conclusion: Shared Praxes, Shared Meanings Postscript Solutions to Problems Notes Authors' Index Subject Index References