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Cooperation in two person games, revisited

Cooperation in two person games, revisited Cooperation in Two Person Games, Revisited ADAM KALAI and EHUD KALAI Microsoft Research and Northwestern University Luminaries such as Nash (1953), Rai €a (1953), and Selten (1960), studied cooperation in twoperson strategic games. We point out that when players may make monetary side payments, i.e., bimatrix games with transferable utility (TU), all previous solutions coincide. This solution is justi ed by simple axioms and an elementary decomposition of every such game into a (competitive) zero-sum game and a (cooperative) team game. Categories and Subject Descriptors: J.4 [Social and Behavioral Sciences]: Economics 1. INTRODUCTION Experiments and experience suggest that agreements may help resolve the tension between cooperation and competition observed in many games. Agreements are especially useful when monetary side payments are possible. We motivate with the simple bimatrix game below, representing the payo €s of two hot-dog vendors in a beach town. Every day, each player must decide whether to locate their cart at the airport (A), where there are 80 customers, or beach (B), where there are 200 customers. Say Player 1 pro ts $3 per customer while Player 2 pro ts $1 per customer. If the two collocate, then they divide the customers equally. A ll http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png ACM SIGecom Exchanges Association for Computing Machinery

Cooperation in two person games, revisited

ACM SIGecom Exchanges , Volume 10 (1) – Mar 1, 2011

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Publisher
Association for Computing Machinery
Copyright
Copyright © 2011 by ACM Inc.
ISSN
1551-9031
DOI
10.1145/1978721.1978725
Publisher site
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Abstract

Cooperation in Two Person Games, Revisited ADAM KALAI and EHUD KALAI Microsoft Research and Northwestern University Luminaries such as Nash (1953), Rai €a (1953), and Selten (1960), studied cooperation in twoperson strategic games. We point out that when players may make monetary side payments, i.e., bimatrix games with transferable utility (TU), all previous solutions coincide. This solution is justi ed by simple axioms and an elementary decomposition of every such game into a (competitive) zero-sum game and a (cooperative) team game. Categories and Subject Descriptors: J.4 [Social and Behavioral Sciences]: Economics 1. INTRODUCTION Experiments and experience suggest that agreements may help resolve the tension between cooperation and competition observed in many games. Agreements are especially useful when monetary side payments are possible. We motivate with the simple bimatrix game below, representing the payo €s of two hot-dog vendors in a beach town. Every day, each player must decide whether to locate their cart at the airport (A), where there are 80 customers, or beach (B), where there are 200 customers. Say Player 1 pro ts $3 per customer while Player 2 pro ts $1 per customer. If the two collocate, then they divide the customers equally. A ll

Journal

ACM SIGecom ExchangesAssociation for Computing Machinery

Published: Mar 1, 2011

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