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A_Course_in_Game_Theory_-_Martin_J._Osborne 31

A_Course_in_Game_Theory_-_Martin_J._Osborne 31 - other who...

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Page 16 Figure 16.1 Bach or Stravinsky? (BoS) (Example 15.3). Figure 16.2 A coordination game (Example 16.1). • Example 16.1 ( A coordination game ) As in BoS, two people wish to go out together, but in this case they agree on the more desirable concert. A game that captures this situation is given in Figure 16.2. Like BoS, the game has two Noah equilibria: ( Mozart, Mozart ) and ( Mahler, Mahler ). In contrast to BoS, the players have a mutual interest in reaching one of these equilibria, namely ( Mozart, Mozart ); however, the notion of Nash equilibrium does not rule out a steady state in which the outcome is the inferior equilibrium ( Mahler , Mahler ). • Example 16.2 (The Prisoner's Dilemma ) Two suspects in a crime are put into separate cells. If they both confess, each will be sentenced to three years in prison. If only one of them confesses, he will be freed and used as a witness against the
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Unformatted text preview: other, who will receive a sentence of four years. If neither confesses, they will both be convicted of a minor offense and spend one year in prison. Choosing a convenient payoff representation for the preferences, we hare the game in Figure 17.1. This is a game in which there are gains from cooperation—the best outcome for the players is that neither confesses—but each player has an incentive to be a "free rider". Whatever one player does, the other prefers Confess to Don't Confess , so that the game has a unique Noah equilibrium ( Confess , Confess ). • Example 16.3 ( Hawk-Dove ) Two animals are fighting over some prey. Each can behave like a dove or like a hawk. The best outcome for...
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