Exam 14: Game Theory and Mutual Interdependence

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The stag hunt framework differs slightly from the framework of Prisoner's Dilemma. In the latter, the only pure Nash equilibrium is when both players defect, even though cooperation by both players is efficient. But the stag hunt game has two predictions (Nash equilibria): a bad one, which is sub-optimal yet safer for each player, and a good one, which is Pareto efficient but risky.

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Experiments allow us to observe human behavior beyond models. Particularly in the context of game theory, experiments provide real-time, recordable evidence of decision-making involving one or more players. Four different categories of experiments exist. These include conventional lab, artefactual field, framed field, and natural field experiments. In the first type, standard subjects are involved in a controlled experiment in a lab, and they are aware of their own participation. In the second, nonstandard participants engage in the same capacity. The third type of experiment involves nonstandard subjects in a natural environment, in which the former are, again, aware of their participation. Finally, natural field experiments involve nonstandard subjects in a natural environment, although in this case, they are unaware of their participation.

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In a vaccination game, Chapman et al. (2012) consider the case of influenza, noting that young people are responsible for most of the transmission, while the elderly experience higher levels of morbidity and mortality. From a social perspective, the optimal strategy is for younger people to assume an important role in the process of vaccination to protect older people. This strategy exists despite the fact that younger people receive a lower personal benefit than older people. This social dilemma fits in a game theory framework. Both individual and group decisions impact the payoffs. The game theory framework predicts how self-interested individuals make private decisions.