Game Theory in Finance

Anjan Thakor ()

Financial Management, 1991, vol. 20, issue 1

Abstract: This paper provides an overview of game theory, in particular its applications in finance. Traditional models in which the uninformed agent moves first are examined initially, and this is followed by an examination of models in which the informed agent moves first. Some of the equilibrium concepts which are discussed are: Nash equilibrium, subgame perfection, sequential equilibrium, the Cho-Kreps intuitive criterion and the Banks-Sobel divinity and universal divinity refinements. Applications to corporate control, capital structure, dividends and stock repurchases, external financing, and financial intermediation are reviewed.

Date: 1991
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