Cooperation in a State of Anarchy
Abhinay Muthoo ()
The Warwick Economics Research Paper Series (TWERPS) from University of Warwick, Department of Economics
We lay down a simple (game-theoretic) model of a state-of-anarchy involving three players. We focus attention on the following question : Which subset of players (if any) will agree to cooperate amongst each other? Will all three players agree to do so, or only two of the three players (and if so, which two players)? Or will no player agree to cooperate with any other player? We show that the socially optimal outcome is for all three players to agree to cooperate with each other. We also show that due to the presence of positive externalities, in equilibrium, cooperation may only be established between two of the three players (which is sub-optimal). JEL codes: D62 ; D74 ; F02
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Working Paper: Cooperation in a State of Anarchy (2020)
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Persistent link: https://EconPapers.repec.org/RePEc:wrk:warwec:1296
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