If the second person accepts, both parties go home richer. If not, nobody gets a penny. The Government turned to the games-playing Professor Ken Binmore at University College to help create its 3G auction for the five mobile telephone licences. His principal theorist was Professor Paul Klemperer, an Oxford economist, who specialises in competition and auction theory. It was Klemperer's theoretical work which underpinned the Government's case for rejecting BSkyB's takeover bid for Manchester United.
Games theorists love auctions because in an auction the rules of the game are clearly defined.
Analysing broader economic behaviour is more complicated because not all the actors agree what game it is they are playing. However, speaking to Binmore and his cohorts is an altogether more complicated business. They are in purdah, forbidden to talk to the media while the auction is on. But Binmore has a lot to be pleased about. So far, that is.