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Organizational Refinements of Nash Equilibrium

Author

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  • Takashi Kamihigashi

    (Research Institute for Economics & Business Administration (RIEB), Kobe University, Japan)

  • Kerim Keskin

    (Department of Economic, Kadir Has University, Turkey)

  • Çağrı Sağlam

    (Department of Economics, Bilkent University, Turkey)

Abstract

Strong Nash equilibrium (see Aumann, 1959) and coalition-proof Nash equilibrium (see Bernheim et al., 1987) rely on the idea that players are allowed to form coalitions and make joint deviations. They both consider a case in which any coalition can be formed. Yet there are many real-life examples where the players cannot form certain types of coalitions/subcoalitions. There may also be instances, when all coalitions are formed, where conflicts of interest arise and prevent a player from choosing an action that simultaneously meets the requirements of the two coalitions to which he or she belongs. Here we address these criticisms by studying an organizational framework where some coalitions/subcoalitions are not formed and where the coalitional structure is formulated in such a way that no conflicts of interest remain. We define an organization as a collection of partitions of a set of players ordered in such a way that any partition is coarser than the partitions that precede it. For a given organization, we introduce the notion of organizational Nash equilibrium. We analyze the existence of equilibrium in a subclass of games with strategic complementarities and illustrate how the proposed notion refines the set of Nash equilibria in some examples of normal form games.

Suggested Citation

  • Takashi Kamihigashi & Kerim Keskin & Çağrı Sağlam, 2017. "Organizational Refinements of Nash Equilibrium," Discussion Paper Series DP2017-25, Research Institute for Economics & Business Administration, Kobe University.
    • Handle: RePEc:kob:dpaper:dp2017-25
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    References listed on IDEAS

    as
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    JEL classification:

    • C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games

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