Games of Love and Hate

Debraj Ray and Rajiv Vohra

No 2018-8, Working Papers from Brown University, Department of Economics

Abstract: A game of love and hate is one in which a playerís payoff is a function of her own action and the payoffs of other players. For each action profile, the associated payoff profile solves an interdependent utility system, and if that solution is bounded and unique for every profile we call the game coherent. Coherent games generate a standard normal form. Our central theorem states that every Nash equilibrium of such a game is Pareto optimal, in sharp contrast to the general prevalence of inefficient equilibria in the presence of externalities. While externalities in our model are restricted to flow only through payoffs there are no other constraints: they could be positive or negative, or of varying sign. We further show that our coherence and continuity requirements are tight.

Date: 2018
New Economics Papers: this item is included in nep-gth, nep-hpe, nep-mic and nep-upt
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Journal Article: Games of Love and Hate (2020)
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Persistent link: https://EconPapers.repec.org/RePEc:bro:econwp:2018-8

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