What is the difference between cooperative, noncooperative and biform game theory?
The first question is, what’s the right way to describe a competitive situation, to look at a situation and answer the question, Should you be making money? It turns out that looking at cooperative games is the right way. Even though most of von Neumann and Morgenstern’s book was about cooperative game theory, the idea that originally appealed to people was so-called noncooperative game theory. In noncooperative game theory, you’re actually specifying the moves and countermoves. The problem is that in business the things you can do are almost beyond comprehension. The strategy set is unlimited. And yet there are times when you can talk about a strategy set. If you’re negotiating something, you don’t want to specify the strategy set. Negotiation is too free-form. But there are times when you can talk about a specific decision: to build a plant or not, for example, to enter a market or not. So those had to be integrated. The general insight that you needed cooperative game theory for the
