Nash bargaining model at work

Was the Greek finance minister pretending to be mad?

Was the Greek negotiating strategy with the Eurogroup designed to convince the rest of Europe that the Syriza government was mad? That is a notion raised by Daniel Finkelstein in The Times today. This idea – which has fans in Westminster and Whitehall – strikes me as a misreading of the situation in Europe. This idea has arisen because Yanis Varoufakis, the former Greek finance minister, is a game theorist, a type of economist who studies interactions in simplified versions of reality. These stylised scenarios are known, in the jargon, as “games”. Famous ones you might have heard of include “the Stag Hunt”, “The Ultimatum Game” and – most famously – “the Prisoner’s Dilemma”. ….[READ]

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