ABSTRACT
Economics is fundamentally about exchange and interaction between people. We can capture some of that by saying that people interact through markets, but a lot of the time that is not enough. We need to think how people interact with each other more directly, and that will be the theme of the next two chapters. In this chapter I want to focus on strategic behavior, which primarily means focusing on how people try to predict what others might do. For example, when should a trader sell her investments to ride the bubble but avoid the crash? What route should she take to work to avoid traf¿ c jams? How much effort should she put into keeping her of¿ ce tidy? And what should she choose for lunch at the canteen? In all these examples, the trader would do best to predict what others will do, whether they are fellow traders or the canteen chef, before making her choice. In this chapter I want to look at how she can do this.
