The strategy of conflict and cooperation

Mehmet S. Ismail

Papers from arXiv.org

Abstract: This paper introduces a unified framework called cooperative extensive form games, which (i) generalizes standard non-cooperative games, and (ii) allows for more complex coalition formation dynamics than previous concepts like coalition-proof Nash equilibrium. Central to this framework is a novel solution concept called cooperative equilibrium system (CES). CES differs from Nash equilibrium in two important respects. First, a CES is immune to both unilateral and multilateral `credible' deviations. Second, unlike Nash equilibrium, whose stability relies on the assumption that the strategies of non-deviating players are held fixed, CES allows for the possibility that players may regroup and adjust their strategies in response to a deviation. The main result establishes that every cooperative extensive form game, possibly with imperfect information, possesses a CES. For games with perfect information, the proof is constructive. This framework is broadly applicable in contexts such as oligopolistic markets and dynamic political bargaining.

Date: 2018-08, Revised 2023-09
New Economics Papers: this item is included in nep-gth and nep-hpe
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