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Game Theory

Game theory is a theoretical framework which can be used to study strategic interactions amongst competing players, providing insights regarding optimal decision making in social situations. Game theory has many important applications in economics, including industrial organization, (e.g., understanding the behavior of firms in oligopolistic markets), mechanism design, auctions (including recent billion-dollar auctions for the rights to portions of the electromagnetic spectrum), incentives for innovation (e.g., benefits and costs of patents), the emergence of social norms, matching theory (e.g., how to match candidates for internship positions in an efficient and stable way), and even improving the efficiency of kidney transplant through welfare-improving kidney exchange mechanisms.