Sveriges Riksbank Prize in Economic Sciences · 1994
Reinhard Selten
He gave economists a test for spotting empty threats, and helped make the laboratory a place to study how real people decide.
The Nobel citation: “for their pioneering analysis of equilibria in the theory of non-cooperative games”
- Born
- October 5, 1930, Breslau, Germany (now Wroclaw, Poland)
- Died
- August 23, 2016, Poznan, Poland
- Shared with
- John C. Harsanyi, John F. Nash Jr.
- Affiliation at the time
- Rheinische Friedrich-Wilhelms-Universität, Germany
Economics prize
1994
Shared with 2 other laureates.
Age that year
64years
Born in 1930.
Sources cited
21
Fact-checked September 24, 2026.
- Classed as half-Jewish under the Nazis, he was forced out of high school at 14 and barred from learning a trade; only unskilled work was open to him.
- Subgame perfection, the idea at the heart of his Nobel, was first defined in a 1965 oligopoly paper; he later wrote he never suspected it would be quoted almost only for that.
- In 1984 he founded the BonnEconLab, which the University of Bonn describes as the oldest laboratory for experimental economics in Europe.
- When he died in 2016, he was still the only German ever to have won the Nobel prize in economics.
- The day his Nobel was announced, he came home from grocery shopping to a crowd of reporters and first helped his wife, a wheelchair user, into the house.
The breakthrough
Ruling out empty threats: subgame perfection and the trembling hand (1965, 1975)
Game theory studies situations where what is best for you depends on what others do, such as firms setting prices or governments making policy. John Nash had defined an equilibrium: a set of choices in which no player can do better by changing course alone. The trouble is that many games have several such equilibria, and some rest on bluffs. Imagine the only shop in town telling a would-be rival: open next door and I will slash my prices until we both lose money. If the rival believes this and stays away, the threat never has to be carried out, so on paper it works. But if the rival did open, a price war would hurt the shop too, so it would likely back down. The threat is empty. In a 1965 paper on competition among a few firms, Selten proposed a test called subgame perfection: a sound prediction must still make sense at every later stage of the game, including stages reached only if someone calls the bluff. It is like checking a chess plan by looking ahead and then reasoning backward from the end, instead of trusting a threat you would never actually carry out. In 1975 he added a sharper test, the trembling hand: a good strategy should still hold up if players now and then make small mistakes. Together these ideas let economists weed out predictions built on threats and promises that no one would keep.[1],[3],[4],[10],[14]
“My situation as a member of an officially despised minority forced me to pay close attention to political matters very early in my life.”
What it meant for humanity
Selten's ideas work behind the scenes. They did not cure a disease or build a machine; they changed how experts reason about situations in which credibility matters. The Royal Swedish Academy of Sciences called subgame perfection the most fundamental refinement of Nash equilibrium and pointed to its direct use in debates about whether economic policy is credible, in the study of markets with only a few sellers, and in the economics of information. When economists ask whether a government's policy promise will be believed, or whether a dominant firm's threat to crush newcomers is real, they apply his test. His 1978 chain store paradox showed that, by strict logic, a chain should not be able to scare off rivals with price wars; the Academy's 2020 prize explanation describes how later work built on that puzzle to model reputations in predatory pricing and price wars. Selten also helped build a second field, experimental economics. When he and Heinz Sauermann ran their oligopoly experiment in the late 1950s, he wrote, no such field yet existed. In 1984 he founded the Bonn Laboratory for Experimental Economics, which the university describes as the oldest of its kind in Europe. Lab tests now help check how rules will work before they are used: before Britain's record 3G mobile-licence auction in 2000, Selten and colleagues tested the government's proposed designs for one of the bidders. The Nobel laureate Alvin Roth wrote that no one else had made such important and sustained contributions to both game theory and experimental economics. Selten's work also reached biology, where he studied evolutionary stability and, with a botanist, how bees pollinate flowers.
- The Royal Swedish Academy of Sciences called subgame perfection the most fundamental refinement of Nash equilibrium, with direct use in judging whether economic-policy promises are credible.[3]
- His 1975 paper introducing trembling-hand perfection has been cited more than 2,000 times in works indexed by Crossref.[14],[20]
- In 1984 he founded the Bonn Laboratory for Experimental Economics (BonnEconLab), which the university describes as the oldest institution of its kind in Europe.[11],[21]
- Nobel laureate Alvin Roth wrote in 1999 that no one else had made such important or sustained contributions to both game theory and experimental economics.[7]
- Before Britain's 2000 auction of 3G mobile licences, which raised more than 22 billion pounds, Selten and colleagues tested the government's proposed auction designs in the laboratory.[12]
- Talks with biologists at Bielefeld led him into biological game theory, including evolutionary stability and, with botanist Avi Shmida, models of how bees pollinate flowers.[1]
Impact in numbers
Selten's contribution is a way of reasoning, so we record no quantified impact claim. Subgame perfection became the standard test for whether threats and promises are credible, used in the study of competition among a few large firms and of whether economic policy will be believed, and his laboratory work helped make experiments a normal part of economics. But no published study measures lives, people or dollars that can be traced to his refinements rather than to game theory as a whole and to the many people who applied it. The closest measurable outcome, government spectrum auctions, rests mainly on auction theory built on John Harsanyi's model of games with incomplete information, as the Academy explained in 2020; Selten's direct part was a lab test of British auction designs for one bidder and advice to a bidder in Germany. Crediting him with a share of that revenue would be guesswork. His lasting legacy is the Bonn laboratory he founded, which the university calls Europe's oldest for experimental economics, the students he trained, and his insistence that theories of rational choice be checked against how people really behave.
EconomyFundamental scienceMathematics
No number is given here on purpose. Some contributions cannot be counted honestly, and we would rather describe them than invent a figure.
The double edge
No direct harm is documented from Selten's work, which was mathematical theory and laboratory research. Three points deserve honest mention. First, game theory grew up partly around nuclear strategy: in the 1960s Selten belonged to a group of game theorists hired by the research firm MATHEMATICA for the US Arms Control and Disarmament Agency and worked on models of nuclear deterrence, though by his own account the group's work was of no practical use to the agency. Second, the auction economics his field made possible has critics. Germany's August 2000 auction of 3G mobile licences, in which Selten advised one of the bidding companies, raised about 50 billion euros; by 2002 two of the buyers, Quam and Mobilcom, had dropped their 3G plans, and the Badische Zeitung called the auction ruinous. Selten said the firms, like the whole market, had been very optimistic about the new technology. Third, his refinements assume perfectly rational players. Selten himself came to doubt that real people reason this way and argued that how people actually decide must be studied by experiment, not worked out from an armchair.
- Minor
Advice to a bidder in Germany's costly 3G auction
In August 2000 mobile firms paid about 50 billion euros for German 3G licences. Selten advised one of the bidding companies. By late 2002 two buyers, Quam and Mobilcom, had abandoned their 3G plans, and the Badische Zeitung called the auction ruinous. Selten said the firms had shared the whole market's very optimistic view of the technology. His role was that of an adviser; he did not design the auction.[13]
- Minor
Cold War work on nuclear deterrence
In the 1960s Selten joined game theorists hired by the research firm MATHEMATICA to work for the US Arms Control and Disarmament Agency, and he worked on models of nuclear deterrence. By his own account the agency got no practical use out of the group, though its members made real advances in theory.[1]
- Minor
Theory built on perfect rationality
Subgame perfection and trembling-hand perfection describe how perfectly rational players would act. Selten called himself a 'methodic dualist' and spent much of his later career on bounded rationality, arguing that the way real people make economic decisions has to be discovered through experiments rather than reasoned out from an armchair.[1],[11]
Against the odds
Selten grew up in Breslau, home to about 20,000 Jews in 1933, a number that had halved by 1939. Under Nazi rule the community was destroyed: most of its synagogues and its schools were wrecked in November 1938, and from 1941 its members were forced into crowded 'Jew houses' and then deported, via camps in Silesia and directly to Auschwitz, Sobibor, Riga and Theresienstadt. By 1943 the community had shrunk to little more than Jews married to non-Jews and a few children. His father, blind since youth and with only three years of schooling, had built a magazine-lending business, but he had to sell it in the mid-1930s because Nazi rules shut Jews out of press-related trades. Nazi race law put people with one or two Jewish grandparents into a separate category, 'Mischlinge' ('mixed-race'), neither German nor Jewish, and Selten's parents had him baptized because of the political climate. His father died of illness in 1942, before the worst of the terror, but several other relatives became victims of the Holocaust. At 14 Selten was forced out of high school and barred from learning a trade. In 1945 the family escaped Breslau on one of the last trains out as Soviet troops advanced, and lived as refugees in Saxony, Austria and Hesse, where he worked as a farmhand until schools reopened. He later wrote that belonging to an officially despised minority taught him to trust his own judgment over propaganda and public opinion.
1938
Persecution
In November 1938 most of Breslau's synagogues and its Jewish schools were destroyed. From 1941 the city's Jews were deported, and by 1943 the community had shrunk to little more than Jews married to non-Jews and a few children.[18]
—
Discrimination
In the mid-1930s his father was forced to sell his magazine-lending business because Nazi rules shut Jews out of press-related trades.[1],[6],[17]
—
Persecution
Under Nazi race law he was treated as half-Jewish, a 'Mischling'; his parents had him baptized a Protestant because of the political situation, but this did not protect him.[1],[6],[16]
—
Family killed
Several of his relatives were victims of the Holocaust. His father escaped that fate only because he died of a serious illness in 1942.[1]
1944
Discrimination
At 14 he had to leave high school and was denied the chance to learn a trade; the only work open to him was unskilled labor.[1],[7]
1945
War
With his mother and siblings he fled Breslau on one of the last trains as Soviet troops advanced, then lived as a refugee in Saxony, Austria and Hesse, working as a farm boy until schools reopened in 1946.[1],[6],[7]
Jewish background
Selten's father, Adolf Selten, was of Jewish origin but belonged to no religious community; his mother, Käthe Luther, was Protestant. His parents meant to let him choose a religion for himself, but under Nazi rule they had him baptized a Protestant. As a young man he left the church and stayed unattached to any religion. The Nazi state still treated him as half-Jewish, and he later described his youth as that of a member of an officially despised minority. Several of his relatives were victims of the Holocaust.[1],[6],[7]
Key dates
October 5, 1930
Born in Breslau, Germany (now Wrocław, Poland), to a Jewish father and a Protestant mother.[1],[2],[7]
1942
His father, Adolf Selten, dies after a serious illness.[1],[7]
1944
Treated as half-Jewish, he is forced out of high school at 14 and barred from learning a trade.[1],[7]
1945
Escapes Breslau with his family on one of the last trains out; they live as refugees in Saxony, Austria and Hesse.[1],[6],[7]
1951
Finishes high school in Melsungen, Hesse, and begins studying mathematics at the University of Frankfurt.[1]
1959
Publishes an early economics laboratory experiment on oligopoly with Heinz Sauermann; marries Elisabeth Langreiner, whom he met through the Esperanto movement.[1],[11]
1961
Earns a PhD in mathematics at Frankfurt, then attends a game theory conference at Princeton at Oskar Morgenstern's invitation.[1]
1965
Defines subgame perfection in a paper on an oligopoly model; meets John Harsanyi at a game theory workshop in Jerusalem.[1],[3]
1975
Introduces trembling-hand perfection in the International Journal of Game Theory.[3],[14]
1978
Publishes 'The Chain Store Paradox', a puzzle about whether threats of price wars can deter rivals.[5],[15]
1984
Joins the University of Bonn and founds the BonnEconLab, which the university calls Europe's oldest laboratory for experimental economics.[1],[11],[21]
1988
Publishes A General Theory of Equilibrium Selection in Games with Harsanyi, after about 18 years of joint work.[1]
October 11, 1994
Shares the Nobel memorial prize in economic sciences with John Harsanyi and John Nash; reporters are waiting when he gets home from grocery shopping.[2],[3],[19]
August 23, 2016
Sources
- 1.Reinhard Selten – Biographical (Nobel autobiography) · NobelPrize.org (Nobel Prize Outreach), 1995
- 2.Reinhard Selten – Facts · NobelPrize.org (Nobel Prize Outreach)
- 3.The Prize in Economics 1994 – Press release · Royal Swedish Academy of Sciences, via NobelPrize.org, 1994
- 4.Award ceremony speech, Prize in Economic Sciences 1994 · NobelPrize.org (Nobel Prize Outreach), 1994
- 5.Improvements to auction theory and inventions of new auction formats: Scientific background on the 2020 Prize in Economic Sciences · Committee for the Prize in Economic Sciences, Royal Swedish Academy of Sciences, 2020
- 6.Reinhard Selten (1930 - 2016) - Biography · MacTutor History of Mathematics, University of St Andrews, 2010
- 7.Reinhard Selten, Whose Strides in Game Theory Led to a Nobel, Dies at 85 · The New York Times (Sam Roberts), 2016
- 8.Wirtschaftsnobelpreisträger Reinhard Selten gestorben · Frankfurter Allgemeine Zeitung (Philip Plickert), 2016
- 9.Nobel-winning game theorist Reinhard Selten dies at 85 · Associated Press, via Phys.org, 2016
- 10.Reinhard Selten (1930–2016), The Concise Encyclopedia of Economics · Library of Economics and Liberty (Econlib), 2008
- 11.Prof. em. Dr. Dr. h. c. mult. Reinhard Selten · BonnEconLab, Department of Economics, University of Bonn
- 12.An Experimental Test of Design Alternatives for the British 3G / UMTS Auction (Abbink, Irlenbusch, Pezanis-Christou, Rockenbach, Sadrieh and Selten) · London Economics working paper, 2001
- 13."Telekom-Unternehmen haben Chancen von UMTS überschätzt" (interview with Reinhard Selten) · Badische Zeitung (Markus Hofmann), 2002
- 14.Reexamination of the perfectness concept for equilibrium points in extensive games, International Journal of Game Theory 4: 25-55 · Springer (International Journal of Game Theory), 1975
- 15.The chain store paradox, Theory and Decision 9: 127-159 · Springer (Theory and Decision), 1978
- 16.The Nuremberg Race Laws · United States Holocaust Memorial Museum, Holocaust Encyclopedia
- 17.Antisemitic Legislation 1933–1939 · United States Holocaust Memorial Museum, Holocaust Encyclopedia
- 18.Breslau (Encyclopaedia Judaica entry) · Jewish Virtual Library (American-Israeli Cooperative Enterprise)
- 19.Interview mit Reinhard Selten: "So schwierig ist das Leben mit dem Nobelpreis auch nicht" · Der Spiegel (Spiegel Online), 2009
- 20.Crossref metadata record for DOI 10.1007/BF01766400 (citation count) · Crossref
- 21.BonnEconLab: Laboratory for Experimental Economics (about the lab) · BonnEconLab, Department of Economics, University of Bonn
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