The possibility of impossible stairways and greener grass
AbstractIn classical game theory, players have finitely many actions and evaluate outcomes of mixed strategies using a von Neumann-Morgenstern utility function. Allowing a larger, but countable, player set introduces a host of phenomena that are impossible in finite games. Firstly, in coordination games, all players have the same preferences: switching to a weakly dominant action makes everyone at least as well off as before. Nevertheless, there are coordination games where the best outcome occurs if everyone chooses a weakly dominated action, while the worst outcome occurs if everyone chooses the weakly dominant action. Secondly, the location of payoff-dominant equilibria behaves capriciously: two coordination games that look so much alike that even the consequences of unilateral deviations are the same may nevertheless have disjoint sets of payoff-dominant equilibria. Thirdly, a large class of games has no (pure or mixed) Nash equilibria. Following the proverb ``the grass is always greener on the other side of the hedge'', greener-grass games model constant discontent: in one part of the strategy space, players would rather switch to its complement. Once there, they'd rather switch back.
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Bibliographic InfoPaper provided by Stockholm School of Economics in its series Working Paper Series in Economics and Finance with number 673.
Length: 15 pages
Date of creation: 28 Aug 2007
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coordination games; dominant strategies; payoff-dominance; nonexistence of equilibrium; tail events;
Other versions of this item:
- Voorneveld, M., 2007. "The Possibility of Impossible Stairways and Greener Grass," Discussion Paper, Tilburg University, Center for Economic Research 2007-62, Tilburg University, Center for Economic Research.
- C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
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