472NOT09.txt Prisoners Dilemma & Chicken September 8, 1996 PRISONERS DILEMMA: game of conflict in which reward for unilateral non-cooperation exceeds both benefit for mutual cooperation AND cost of mutual conflict. Penalty for mutual non-cooperation is not as bad as penalty for exploited cooperation--the suckers payoff. No threats or commitments. Prisoner's Dilemma: situation of mutual defection. Two incentives to defect: defensive and offensive--its better to defect if you think opponent may defect; its better to defect if you imagine that adversary may not. So, irrespective of what the other side may be do, there are defensive and offensive incentives for defection. Mutual cooperation possible if players expect to meet again. Future can cast shadow on present and encourage cooperation. CHICKEN: game of cooperation in which the penalty for mutual non-cooperation is worse than penalty for exploited cooperation. The suckers payoff is not so bad in chicken! Deterrence and coercion are more relevant to Chicken than to Prisoner's Dilemma. CRITICAL RISK: In coercive situations like chicken, estimate the degree of risk you are willing to endure before yielding. Your Critical Risk is a function of your utilities, e.g., what you stand to gain or lose in a given situation. Then compare your critical risk with your estimate of the other sides likelihood of carrying out a threat, i.e., threat credibility. If your CRITICAL RISK is higher than the others threat credibility, stand fast. If your CRITICAL RISK is lower than the credibility of the adversarys threat, comply. THREAT CREDIBILITY: enhance likelihood of carrying out a threat via irrevocable commitments to foreclose alternatives to compliance, appear to lose control over subordinates, pretend to be reckless, seem to be irrational. Theory of COLLECTIVE GOODS: situation in which it is not rational for members of groups to pay their share in order to obtain a good that is collectively enjoyed. Individuals contributions have little or no effect on whether they obtain a good. If you expect others to cooperate by paying dues, defector can enjoy collective good without paying cost. Individual defector also avoids suckers payoff. Ways out of collective goods problem: coercion or provision of selective incentives, e.g., rewards for dues-paying other than the collective good. DOLLAR AUCTION GAME: paradox in non-cooperative behavior and escalation. Auctioneer auctions off a dollar to highest bidder. Both highest and second bidder pay. Critical zones passed when sum of two bids exceeds a dollar and when one of the bids exceeds a dollar. Threats and coalitions?