Discrete Games: A Historical Perspective

In the seventies, building on the statistical literature, economists have developed interest in the empirical analysis of qualitative variables with the log-linear probability and latent variable models, analyzing individual decisions within a simultaneous equation setting. Starting from the eighties, they began to rely on game theoretic formulations to account for strategic interactions among agents with random utility. This chapter presents the first contributions to the econometrics of discrete games through noncooperative solution concepts, namely Nash and Stackelberg equilibria. This game theoretic approach to the empirical analysis of agents’ decisions has led to a rich literature which continues to expand with applications to various domains in economics such as industrial organization, labor, public and development economics as well as beyond the economics field.