Extensive form games with incentive stage-bidding: An emergence of non-cooperative cooperation

This paper proposes and studies a mechanism modelling the emergence of cooperation in non-cooperative multi-player extensive form games. We consider such games enriched with additional “stage bidding actions”, where at each decision node of the game tree, before the player controlling that node makes a decision every other player may make a committed offer (‘bid’) to pay an explicitly proposed amount of utility to the controlling player if she makes the choice explicitly indicated in the bid. In this work we assume that the bids are made simultaneously by all players. The controlling player then considers all these bids and then decides on its move. The effect of each bid associated with that choice is that it modifies the payoffs in the respective subgame according to the bid by transferring the proposed amounts of utility from the bidder to the controlling player who made the choice; all other bids made at that stage become irrelevant. Thus, these stage bids serve as an incentives-based mechanism that enables reaching a mutually beneficial cooperation in extensive form games.