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Improving Nash by coarse correlation

  • Moulin, Herve
  • Ray, Indrajit
  • Sen Gupta, Sonali

We consider a class of symmetric two-person quadratic games where coarse correlated equilibria – CCE – (Moulin and Vial [16]) can strictly improve upon the Nash equilibrium payoffs, while correlated equilibrium – CE – (Aumann [3,4]) cannot, because these games are potential games with concave potential functions. We compute the largest feasible total utility in any CCE in those games and show that it is achieved by a CCE involving only two pure strategy profiles. Applications include the Cournot duopoly and the game of public good provision, where the improvement over and above the Nash equilibrium payoff can be substantial.

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Article provided by Elsevier in its journal Journal of Economic Theory.

Volume (Year): 150 (2014)
Issue (Month): C ()
Pages: 852-865

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Handle: RePEc:eee:jetheo:v:150:y:2014:i:c:p:852-865
Contact details of provider: Web page: http://www.elsevier.com/locate/inca/622869

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  1. AUMANN, Robert J., . "Subjectivity and correlation in randomized strategies," CORE Discussion Papers RP -167, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
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  4. Herve Moulin & Indrajit Ray & Sonali Sen Gupta, 2014. "Coarse correlated equilibria in an abatement game," Working Papers 68684722, Lancaster University Management School, Economics Department.
  5. Sergiu Hart & Andreu Mas-Colell, 1997. "A Simple Adaptive Procedure Leading to Correlated Equilibrium," Game Theory and Information 9703006, EconWPA, revised 24 Mar 1997.
  6. Young, H. Peyton, 2004. "Strategic Learning and its Limits," OUP Catalogue, Oxford University Press, number 9780199269181, March.
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  9. Gerard-Varet, L. A. & Moulin, H., 1978. "Correlation and duopoly," Journal of Economic Theory, Elsevier, vol. 19(1), pages 123-149, October.
  10. Indrajit Ray & Sonali Sen Gupta, 2012. "Coarse Correlated Equilibria and Sunspots," Discussion Papers 11-14r, Department of Economics, University of Birmingham.
  11. R. Aumann, 2010. "Correlated Equilibrium as an expression of Bayesian Rationality," Levine's Bibliography 513, UCLA Department of Economics.
  12. Yi, Sang-Seung, 1997. "On the existence of a unique correlated equilibrium in Cournot oligopoly," Economics Letters, Elsevier, vol. 54(3), pages 235-239, July.
  13. Sergiu Hart, 2005. "Adaptive Heuristics," Econometrica, Econometric Society, vol. 73(5), pages 1401-1430, 09.
  14. Forgo, Ferenc & Fulop, Janos & Prill, Maria, 2005. "Game theoretic models for climate change negotiations," European Journal of Operational Research, Elsevier, vol. 160(1), pages 252-267, January.
  15. Hart, Sergiu & Mas-Colell, Andreu, 2003. "Regret-based continuous-time dynamics," Games and Economic Behavior, Elsevier, vol. 45(2), pages 375-394, November.
  16. Barrett, Scott, 1994. "Self-Enforcing International Environmental Agreements," Oxford Economic Papers, Oxford University Press, vol. 46(0), pages 878-94, Supplemen.
  17. Indrajit Ray & Sonali Gupta, 2013. "Coarse correlated equilibria in linear duopoly games," International Journal of Game Theory, Springer, vol. 42(2), pages 541-562, May.
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