Abstract
In this thesis, game theoretical methods are applied in two distinct areas. First, the strategic interaction between players in financial markets is studied. In particular, the strategic interaction between informed traders, noise traders, and market makers is studied. A bid-ask spread is introduced into the Kyle model,
and it is also shown that noise traders can be endogenized within the GlostenMilgrom framework. Second, evolutionary game theory is used to study how preferences, especially social preferences, have been formed. A group selection model based on reproductive externalities is developed, and it is shown that it can account not only for altruism, but also for other social preferences, such as spite and willingness to undertake costly punishment. The literature on group selection is also surveyed. The early contributions and the group selection controversy are described. The main approaches to group selection in the recent literature -fixation, assortative group formation, and reproductive externalities - are also described and discussed.