6 Limitations of game theory
As game theory applications have become more widespread throughout economics
and the other social and natural sciences, certain criticisms have arisen
regarding the validity of its conclusions. There have been various empirical
studies where the findings have been contrary to game theory predictions.
A well-known example of this is Frank’s ultimatum bargaining game. This is a
dynamic game where a sum of money, say £100, is to be divided between two
players. The first player makes a bid regarding how the money should be split,
and the second player can either accept or reject the amount offered. If the
second player rejects the offer neither player receives anything