Enhancing Game-Theoretic Models to Account for Cooperative Behavior
Standard game-theoretic models are often built on the assumptions that individuals are purely self-interested and that their interactions are one-time events. These models frequently fail to predict the cooperative behavior observed in reality. To create models that are more consistent with empirical evidence, economists incorporate factors such as altruism, the dynamics of repeated interactions, and the influence of social norms.
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Introduction to Microeconomics Course
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CORE Econ
Ch.4 Strategic interactions and social dilemmas - The Economy 2.0 Microeconomics @ CORE Econ
The Economy 2.0 Microeconomics @ CORE Econ
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Enhancing Game-Theoretic Models to Account for Cooperative Behavior
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Contextual Applicability of the Self-Interest Model
Individual Preferences
Use of Controlled Experiments to Empirically Investigate Economic Behavior
Market Failures from the Pursuit of Self-Interest
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Interdisciplinary Applications of Game Theory
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Equilibrium (in a Model)
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Self-Interest in Economic Models
Homo Economicus
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Definition of Social Dilemma
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John Nash
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Strategic Business Decisions
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Analyzing US Financial Fragility
Two competing coffee shops, 'The Daily Grind' and 'Espresso Yourself', are located across the street from each other. Each must independently decide whether to lower their prices. The table below shows the daily profit each shop can expect based on their combined decisions. The first number in each cell is the profit for The Daily Grind, and the second is for Espresso Yourself.
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Learn After
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Reputation and Increased Cooperation in Repeated Prisoners' Dilemma Games
Elinor Ostrom
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In a scenario where two competing local businesses must decide on their advertising spending, a model assuming a single, isolated interaction between purely self-interested parties predicts that both will choose high-spending strategies, resulting in lower profits for both. However, if these businesses are located in a small town and expect to compete for many years, they often end up cooperating by keeping advertising spending low. Which of the following best explains this cooperative outcome, which the simpler model fails to predict?
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In many large, anonymous online forums, users voluntarily spend time answering complex questions posed by strangers, even with no direct monetary reward. A simple economic model assuming that individuals are purely self-interested and engage in one-time interactions would predict that very few people would answer questions. Which of the following factors, used to enhance such models, provides the least compelling explanation for the widespread cooperative behavior observed in these forums?
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A game-theoretic model that is expanded to include the possibility of repeated interactions between players will necessarily predict a cooperative outcome.
Explaining Cooperation in an Anonymous Online Project
A simple economic model predicts that two rival software companies, in a one-time interaction, will both engage in costly negative advertising, hurting each other's profits. However, in reality, these companies often refrain from such tactics. An analyst suggests modifying the model by incorporating 'altruism,' assuming each company has some baseline concern for the other's success. Why is this modification, by itself, likely an incomplete explanation for the observed cooperative restraint?
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