Efficiency in strategic form games: A little trust can go a long way
AbstractWe study the incentives of noncooperative players to play a cooperative game. That is, we look for individually rational, redistributive, pre-game agreements enacted in order to coordinate towards efficient equilibrium play. Contrasting with standard Nash equilibrium analysis, we assume that players can commit to the agreements they negotiate and that utility is verify and transferable. We show that agreeing on a proportional-exponential redistribution rule is individually rational and implements the socially efficient outcome as Nash equilibrium. Moreover, we show that this class of redistributional contracts may be naturally obtained as the outcome of Nash bargaining.
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Bibliographic InfoPaper provided by Department of Economics, University of York in its series Discussion Papers with number 13/19.
Date of creation: Jul 2013
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Redistribution; Efficiency; Social contract;
Find related papers by JEL classification:
- C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
- D62 - Microeconomics - - Welfare Economics - - - Externalities
- D71 - Microeconomics - - Analysis of Collective Decision-Making - - - Social Choice; Clubs; Committees; Associations
This paper has been announced in the following NEP Reports:
- NEP-ALL-2013-07-28 (All new papers)
- NEP-GTH-2013-07-28 (Game Theory)
- NEP-HPE-2013-07-28 (History & Philosophy of Economics)
- NEP-MIC-2013-07-28 (Microeconomics)
- NEP-SOC-2013-07-28 (Social Norms & Social Capital)
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