Cooperation Game

                              Cooperative Game Theory

A cooperative game is one in which players are able to make enforceable contracts. Hence, it is not defined as games in which players actually do cooperate, but as games in which any cooperation is enfoceable by an outside party (e.g., a judge, police, etc.). In termed non-cooperative games, contracts must be self-enforcing.

Non-cooperative game theory specifies the strategic structure of an interaction: • The participants (players) in a strategic interaction. • Who can do what and when, and what they know when they do it. • The payoffs of players as a function of the choices of all players. Solution concepts (Dominance, Rationalisability, Nash, Perfectness etc.) were strategically based(sometimes incorporating notions of beliefs). A focus on single-player deviations.

In contrast, cooperative game theory specifies no such strategic structure, just: • The participants (players) in a given interaction. • What each subset of players (or “coalition”) can jointly achieve. • Cooperative solution concepts focus on the deviations of coalitions of players • . . . and are based on what payoffs players can achieve rather than what they do.