David M. Kreps is the Adams Distinguished Professor Emeritus of Management at Stanford University’s Graduate School of Business. He is a Distinguished Fellow of the American Economic Association, a fellow of the Econometric Society and the American Academy of Arts and Sciences, and a member of the National Academy of Sciences. His books include Microeconomic Foundations I: Choice and Competitive Markets (Princeton), Microeconomics for Managers (Princeton), The Motivation Toolkit: How to Align Your Employees’ Interests with Your Own, and The Black-Scholes-Merton Model as an Idealization of Discrete-Time Economies.

• PrefaceChapter Seventeen. Introduction to Volume II: Not a Symphony, but ÈtudesChapter Eighteen. Cournot and Bertrand18.1. Basic Cournot18.2. Cournot “In General”18.3. Basic Bertrand18.4. Differentiated GoodsBibliographic NotesProblemsChapter Nineteen. Moral Hazard and Incentives19.1. A Very Simple Model19.2. A Somewhat General Model19.3. Back to Effort Incentives19.4. A Continuum of Actions and the First-order Approach19.5. Linear Incentive Schemes19.6. Linear Incentives? Holmstrom and Milgrom (1987)19.7. Is Risk Aversion the Key to Agency Issues?Bibliographic NotesProblemsChapter Twenty. Private Information Part I: One-shot Interactions20.1. Adverse Selection: Akerlof’s Market for Lemons20.2. Akerlof Meets Game Theory: One Seller20.3. Adverse Selection in Other Contexts20.4. A Toy Model of Adverse Selection in Insurance20.5. Screening as an Economic Concept20.6. Single Crossing20.7. Insurance with Two Types20.8. Signaling: Spence’s Job Market20.9. Cheap TalkBibliographic NotesProblemsChapter Twenty-One. Private Information Part II: An Introduction to Dynamics21.1. Analysis of the Coase Conjecture in the Textbook Model21.2. When Does the Coase Conjecture Hold?21.3. (How) Can the Monopolist Escape the Coase-Conjecture Trap?21.4. Other ContextsBibliographic NotesProblemsChapter Twenty-Two. Credibility: Reciprocity and Reputation22.1. Oligopoly and Implicit Collusion22.2. Entry Deterrence and Predation: The Chain-Store Paradox22.3. Relational ContractingBibliographic NotesProblemsChapter Twenty-Three. Bilateral Bargaining23.1. One-Sided Bargaining23.2. The Two-Sided Demand Game23.3. Rubinstein’s Alternating-Offer Game23.4. Alice and Bob Negotiate Where to Eat Dinner23.5. Abreu and Gul (2000); A War of Attrition with Incomplete Information23.6. The “Most Natural” Context with Private Information and Simultaneous Bid and Ask23.7. The Most Natural Context and Dynamic Bargaining23.8. Axiomatic Approaches: The Nash Bargaining SolutionBibliographic NotesProblemsChapter Twenty-Four. Auctions24.1. A Typology: Context and Protocol24.2. Private Values24.3. Common-Value Contexts: Preliminaries24.4. Symmetric Equilibria in the Wallet-Game Context24.5. The Drainage-Tract Context (a.k.a. Maxco–Gambit)24.6. Conditionally Independent Signals24.7. Multi-Item Auctions24.8. Why Do We (Think We) Know More about Auctions Than about Bilateral Bargaining?Bibliographic NotesProblemsChapter Twenty-Five. Matching Markets25.1. Contexts25.2. The Classic Marriage Market25.3. The Lattice Structure of Stable Matches25.4. Many-to-One Matches: The College-Admissions and Job-Assignment Models25.5. Salaries and Other Terms and Conditions25.6. Strategic ConsiderationsBibilographic NotesProblemsChapter Twenty-Six. Mechanism Design26.1. Social-Choice Contexts, Mechanisms, Truth Telling, and the Revelation Principle26.2. The Gibbard–Satterthwaite Theorem26.3. Nash Implementation: Monotonicity and Maskin’s Theorem26.4. The Vickrey–Clarke–Groves (VCG) Mechanisms26.5. The VCG Mechanism and Auctions26.6. Optimal Auctions: Myerson (1981)26.7. Mechanism Design for Bilateral Bargaining: Myerson and Sattherthwaite (1983)26.8. And What about … ? A Bottom Line on Mechanism DesignBibliographic NotesProblemsAppendix Nine. Strategic-Form GamesA9.1. Basic DefinitionsA9.2. Mixed Strategies: Simple and OtherwiseA9.3. Dominance: What (Probably?) Won’t HappenA9.4. Rationalizability: A Seemingly Different Take on What Won’t HappenA9.5. Nash EquilibriumA9.6. Correlated EquilibriaBibliographic NotesAppendix Ten. Extensive-Form GamesA10.1. The Definition of a Finite Extensive-Form GameA10.2. Diagramming Finite Extensive-Form GamesA10.3. Games with Perfect RecallA10.4. Strategies and the Corresponding Strategic-Form GameA10.5. Mixed Strategies, Behaviorally Mixed Strategies, and Kuhn’s TheoremA10.6. Dominance and Nash EquilibriumA10.7. Beyond Finite Extensive-Form GamesA10.8. Existence of Nash EquilibriaA10.9. Strategically Equivalent Extensive FormsBibliographic NotesAppendix Eleven. Subgame Perfection (and Credibility)A11.1. Subgame PerfectionA11.2. Games of Complete and Perfect InformationA11.3. A Different Credibility IssueBibliographic NotesAppendix Twelve. Beliefs and Sequential RationalityA12.1. Motivation for this AppendixA12.2. Beliefs and Sequential RationalityA12.3. On-Path Consistency and Nash EquilibriumA12.4. Consistency of Off-Path BeliefsA12.5. The Bottom Line on Consistency of Beliefs (and Sequential Rationality)A12.6. Trembling-Hand-Perfect and Proper EquilibriaBibliographic NotesAppendix Thirteen. Common Knowledge and Games of Incomplete InformationA13.1. Common Knowledge FormalizedA13.2. Games of Incomplete InformationA13.3. (Non)Robustness to Lack of Common KnowledgeBibliographic NotesAppendix Fourteen. Forward Induction, Strategic Stability and Beliefs-Based RefinementsA14.1. MotivationA14.2. Equilibrium Outcomes Instead of EquilibriaA14.3. Strategic Stability: An OverviewA14.4. Disposing of Unstable Equilibrium Outcomes: The Never-a-Weak-Best-Response TestA14.5. The Intuitive Criterion and Beyond: Intuitively Appealing Stories (Perhaps)Bibliographic NotesAppendix Fifteen. Repeated Play: Relationships, Reputation, and the Folk TheoremA15.1. The Base Model and Some VariationsA15.2. The Repeated Prisoners’ DilemmaA15.3. The (Straightforward) Folk Theorem(s)A15.4. Discount Factors Bounded Away From 1A15.5. (So-Called) Finite HorizonsA15.6. Imperfect Observability, Hidden Information, and Public EquilibriaA15.7. Instrumental ReputationA15.8. Enduring Private (Incomplete) InformationA15.9. Building a Reputation?Bibliographic NotesAppendix Sixteen. The Revelation PrincipleA16.1. The ProblemA16.2. Direct Revelation and Truth TellingA16.3. The Revelation PrinciplesA16.4. Can You Find a Referee? Practical Implementation of a Contingent OutcomeA16.5. VariationsBibliographic NotesAppendix Seventeen. Envelope TheoremsA17.1. A Classical Envelope Theorem and an ExtensionA17.2. The Integrated Envelope TheoremReferencesIndex