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Cooperative Equilibrium: A solution predicting cooperative play by Rong, Nan; Halpern, Joseph Y. is a scholarly article available to read on EtoBox.

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Nash equilibrium (NE) assumes that players always make a best response. However, this is not always true; sometimes people cooperate even it is not a best response to do so. For example, in the Prisoner's Dilemma, people often cooperate. Are there rules underlying cooperative behavior? In an effort to answer this question, we propose a new equilibrium concept: perfect cooperative equilibrium (PCE), and two related variants: max-PCE and cooperative equilibrium. PCE may help explain players' behavior in games where cooperation is observed in practice. A player's payoff in a PCE is at least as high as in any NE. However, a PCE does not always exist. We thus consider {\alpha}-PCE, where {\alpha} takes into account the degree of cooperation; a PCE is a 0-PCE. Every game has a Pareto-optimal max-PCE (M-PCE); that is, an {\alpha}-PCE for a maximum {\alpha}. We show that M-PCE does well at predicting behavior in quite a few games of interest. We also consider cooperative equilibrium (CE), another generalization of PCE that takes punishment into account. Interestingly, all Pareto-optimal M-PCE are CE. We prove that, in 2-player games, a PCE (if it exists), a M-PCE, and a CE can all be found

Author

Rong, Nan; Halpern, Joseph Y.

Published

2014

Language

EN