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Every normal-form game has a Pareto-optimal nonmyopic equilibrium

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Listed:
  • Steven J. Brams

    (New York University)

  • Mehmet S. Ismail

    (King’s College London)

Abstract

It is well known that Nash equilibria may not be Pareto-optimal; worse, a unique Nash equilibrium may be Pareto-dominated, as in Prisoners’ Dilemma. By contrast, we prove a previously conjectured result: every finite normal-form game of complete information and common knowledge has at least one Pareto-optimal nonmyopic equilibrium (NME) in pure strategies, which we define and illustrate. The outcome it gives, which depends on where play starts, may or may not coincide with that given by a Nash equilibrium. We use some simple examples to illustrate properties of NMEs—for instance, that NME outcomes are usually, though not always, maximin—and seem likely to foster cooperation in many games. Other approaches for analyzing farsighted strategic behavior in games are compared with the NME analysis.

Suggested Citation

  • Steven J. Brams & Mehmet S. Ismail, 2022. "Every normal-form game has a Pareto-optimal nonmyopic equilibrium," Theory and Decision, Springer, vol. 92(2), pages 349-362, March.
  • Handle: RePEc:kap:theord:v:92:y:2022:i:2:d:10.1007_s11238-021-09824-1
    DOI: 10.1007/s11238-021-09824-1
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    Cited by:

    1. Giacomo Bonanno, 2022. "Rational Play in Extensive-Form Games," Games, MDPI, vol. 13(6), pages 1-20, October.

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    More about this item

    Keywords

    Farsightedness; Nonmyopic equilibrium; Cooperation; Game theory; Dynamic analysis of games;
    All these keywords.

    JEL classification:

    • C70 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - General
    • D74 - Microeconomics - - Analysis of Collective Decision-Making - - - Conflict; Conflict Resolution; Alliances; Revolutions
    • F50 - International Economics - - International Relations, National Security, and International Political Economy - - - General

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