"Assurance game" is a general name for the game more commonly known as "Stag Hunt." The French philosopher, Jean Jacques Rousseau, presented the subsequent circumstances. Two hunters can moreover jointly hunt a stag (an adult deer and quite large meal) or individually hunt a rabbit (tasty, but significantly less filling). Hunting stags is quite difficult and need mutual cooperation. If either hunts a stag alone, the chance of victory is negligible. Hunting stags is most advantageous for society but needs a ample of trust amid its members.

Description

 

There are two pure policy equilibria. Both players favor one equilibrium to the other - it is both Pareto optimal and Hicks optimal. However, the incompetent equilibrium is less risky as the payoff variance over the other player's strategies is lower. Specifically, one equilibrium is payoff-dominant while the other is risk-dominant.

Example

	Firm 2
		invest	don't
Firm 1	invest	10,10	-50,0
	don't	0,-50	0,0

General Form

		Player 2
		L	R
Player 1	U	I,V	II,VI
	D	III,VII	IV,VIII

Where the following relations hold:
I> III >= IV > II 
V > VI >= VIII> VII

 

Posted Date: 7/21/2012 5:23:01 AM | Location : United States

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