Bulletin Autumn‧Winter 2003

‘Subgame perfection' was found to be a discovery of such fundamental importance to economics and other fields that all future thinking about strategic interactions between competitors has had to take it into account. It is for this discovery among others that Reinhard Selten was awarded the Nobel Prize for Economics in 1994. hours it took h i m to wa lk back and forth from school before he moved to Melsungen he occupied his m i nd solving problems i n geometry and algebra. Here he developed his lifelong love of walking in forested hills and of t h i n k i ng w h i l e he does so. I n previous visits to The Chinese University of Hong Kong, he has enjoyed hiking in the beautiful hills around here. From 1951 to 1957 Prof. Selten studied mathematics at the University of Frankfurt. He was not a particularly focused student at first, but he thinks himself fortunate that he attended lectures i n a w i de variety of fields such as psychology because some of these extracurricular interests later became of g r eat a d v a n t a ge to h i m . He h a d discovered game theory in a popular article in Fortune magazine and followed it u p by s t ud y i ng the f undamen t al book by v o n Neumann and Morgenstern in the library. He was i mm e d i a t e ly f a s c i n a t ed and became the first master's student at the University of Frankfurt to be allowed to minor in mathematical economics. The early research Prof. Selten d id for his postgraduate dissertations was some of the most important work he did in his whole career. As he says himself i n his No b el autobiography: ‘ My master's thesis and later my Ph.D. thesis had the aim of axiomatizing a value for n-person games i n extensive form. This wo rk made me familiar w i th the extensive f o rm, i n a time wh en v e ry little w o r k on extensive games was done. This enabled me to see the perfectness problem earlier than others and to write the contributions for which I am now honored by the prize in memory of Alfred Nobel.' Between his master's degree and his Ph.D. Prof. Selten worked for one of his ma j or me n t o r s, the e c onom i st He i nz Sauermann, where his own research took a crucial turn. He realized that the solutions to the problems he was interested i n could not be found simply by reflecting on them in his armchair. The reason is that economic behaviour is not f u l ly rational, but on ly rational w i t h in certain boundaries. Because of this, he needed to subject his hypotheses to the test of emp i r i c al o b s e r v a t i o n. Fortunately he was then able to call upon what he had learned as a young unfocused mathematics student attending the lectures of the famous gestalt psychologist, Edw in Rausch. It was Rausch's careful approach to experiments that had taught h i m about rigorous experimental method and design. This wo r k led to his first published paper in 1959 called ‘ An Oligopoly Experiment'. It was f r om this period that Prof. Selten began to be distinguished among game theorists as a ‘methodological d u a l i s t '— one whose research was f ounded simultaneously on axiomatic and experimental mo d es of i n q u i r y. A l o n g w i t h P r o f. Sauermann, he was a leader of the German school of experimental economists. A f t e r his Ph.D. Prof. Selten began experimental wo rk that led to his famous pape r, p u b l i s h ed i n 1965, ca l l ed ‘ A n Oligopoly Model w i t h Demand Inertia'. A t the time he had no idea that it wo u ld come to be quoted so often, almost exclusively Chinese University Bulletin Autumn • Winter 2003 62