Economics Game Theory In Behavioral Economics Questions Medium
In game theory, cooperative and non-cooperative games are two different approaches to analyzing strategic interactions between rational decision-makers.
Cooperative games involve players who can form coalitions and make binding agreements to achieve a certain outcome. In these games, players can communicate, negotiate, and cooperate with each other to maximize their joint payoffs. The focus is on how players can work together to achieve a mutually beneficial outcome. Cooperative game theory often involves concepts such as coalition formation, bargaining, and the distribution of payoffs among players.
On the other hand, non-cooperative games assume that players act independently and make decisions without any binding agreements or communication. In these games, players are solely concerned with maximizing their own individual payoffs, without considering the impact on others. Non-cooperative game theory focuses on analyzing strategic interactions where players make decisions based on their own self-interest, taking into account the actions and potential reactions of other players. Common solution concepts in non-cooperative games include Nash equilibrium, where no player has an incentive to unilaterally deviate from their chosen strategy, and dominant strategies, where a player's best choice is independent of the choices made by others.
In summary, the main difference between cooperative and non-cooperative games lies in the level of cooperation and communication allowed among players. Cooperative games involve players forming coalitions and making binding agreements, while non-cooperative games assume independent decision-making without any communication or cooperation.