Environmental Engineering Reference
In-Depth Information
what produces a stable cooperative solution. The approach described up to this point
has been noncooperative. The best way to think about the process for identifying a co-
operative solution is to first go through the process of identifying the likely noncoop-
erative solution, identify that better outcomes exist, and then proceed with the ap-
proach to identifying a stable bargaining solution described following here.
Although noncooperative game theory is more commonly used, cooperative
game-theoretic analyses are used for situations when individual decision making does
or will lead to an outcome that is not socially optimal, and might not even be individ-
ually optimal. A common example of this situation is the prisoner's dilemma
(Rapoport and Chammah 1965), a stylized model that has been applied to various
problems of public goods and common property resources. The key element is that
decisions that are good for the individual, all else equal, are not good for the group as
a whole. If everyone makes the individually advantageous decision though, everyone
is worse off. Simply, a prisoner's dilemma is a situation where parties acting in their
own self-interest lead to a worse outcome than what would be available otherwise.
The basic story is that two suspected coconspirators in a crime with some evidence
against them are each separately offered the opportunity to confess and, by doing so,
lower their individual punishment (fig. 17.3). If one confesses and the other does not,
the confessor receives a more lenient punishment. Therefore, both have an incentive
to confess, whereas their best-case outcome is for neither to confess. If the two suspects
had the ability to communicate and form a binding agreement not to confess, they
would both be better off than otherwise.
While the actual legal scenario might not be terribly likely, such incentives do
FIGURE 17.3.
A prisoner's dilemma game involves a situation wherein the Nash equilibrium
(individual self-interested behavior) leads to an outcome that is worse for both players than an-
other available outcome. Cooperative techniques are designed to avoid such inefficient, un-
desirable outcomes. The social problem is caused by the fact that whether one player chooses
to cooperate (silent) or not (confess), the other player is better off not cooperating (confess).
