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Improving Nash by Coarse Correlation

  • Herve Moulin
  • Indrajit Ray
  • Sonali Sen Gupta

We consider a class of symmetric two-person quadratic games where coarse correlated equilibria - CCE - (Moulin and Vial 1978) can strictly improve upon the Nash equilibrium payoffs, while correlated equilibrium - CE - (Aumann 1974, 1987) cannot, because these games are potential games. 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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File URL: ftp://ftp.bham.ac.uk/pub/RePEc/pdf/13-10.pdf
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Paper provided by Department of Economics, University of Birmingham in its series Discussion Papers with number 13-10.

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Length: 20 pages
Date of creation: Mar 2013
Date of revision:
Handle: RePEc:bir:birmec:13-10
Contact details of provider: Postal: Edgbaston, Birmingham, B15 2TT
Web page: http://www.economics.bham.ac.uk

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  1. Aumann, Robert J., 1974. "Subjectivity and correlation in randomized strategies," Journal of Mathematical Economics, Elsevier, vol. 1(1), pages 67-96, March.
  2. Sergiu Hart, 2013. "Adaptive Heuristics," World Scientific Book Chapters, in: Simple Adaptive Strategies From Regret-Matching to Uncoupled Dynamics, chapter 11, pages 253-287 World Scientific Publishing Co. Pte. Ltd..
  3. Moulin, Herve & Ray, Indrajit & Gupta, Sonali Sen, 2014. "Coarse Correlated Equilibria in an Abatement Game," Cardiff Economics Working Papers E2014/24, Cardiff University, Cardiff Business School, Economics Section.
  4. Sergiu Hart & Andreu Mas-Colell, 1996. "A simple adaptive procedure leading to correlated equilibrium," Economics Working Papers 200, Department of Economics and Business, Universitat Pompeu Fabra, revised Dec 1996.
  5. Barrett, Scott, 1994. "Self-Enforcing International Environmental Agreements," Oxford Economic Papers, Oxford University Press, vol. 46(0), pages 878-94, Supplemen.
  6. 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.
  7. R. Aumann, 2010. "Correlated Equilibrium as an expression of Bayesian Rationality," Levine's Bibliography 513, UCLA Department of Economics.
  8. P. Diamond, 1980. "Aggregate Demand Management in Search Equilibrium," Working papers 268, Massachusetts Institute of Technology (MIT), Department of Economics.
  9. Indrajit Ray & Sonali Sen Gupta, 2012. "Coarse Correlated Equilibria and Sunspots," Discussion Papers 11-14r, Department of Economics, University of Birmingham.
  10. 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.
  11. Young, H. Peyton, 2004. "Strategic Learning and its Limits," OUP Catalogue, Oxford University Press, number 9780199269181, March.
  12. Arce M. D. G., 1996. "The economic consequences of the peace: Keynes and correlation," Mathematical Social Sciences, Elsevier, vol. 31(1), pages 50-50, February.
  13. Sergiu Hart & Andreu Mas-Colell, 2001. "Regret-Based Continuous-Time Dynamics," Discussion Paper Series dp309, The Federmann Center for the Study of Rationality, the Hebrew University, Jerusalem, revised Apr 2003.
  14. Daniel Arce, 1997. "Correlated strategies as Institutions," Theory and Decision, Springer, vol. 42(3), pages 271-285, May.
  15. Gerard-Varet, L. A. & Moulin, H., 1978. "Correlation and duopoly," Journal of Economic Theory, Elsevier, vol. 19(1), pages 123-149, October.
  16. Liu, Luchuan, 1996. "Correlated Equilibrium of Cournot Oligopoly Competition," Journal of Economic Theory, Elsevier, vol. 68(2), pages 544-548, February.
  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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