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Stabilizing unstable outcomes in prediction games

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  • Brams, Steven
  • Kilgour, Marc

Abstract

Assume in a 2-person game that one player, Predictor (P), does not have a dominant strategy but can predict with probability p > 1/2 the strategy choice of an opponent, Predictee (Q). Q chooses a strategy that maximizes her expected payoff, given that she knows p—but not P’s prediction—and that P will act according to his prediction. In all 2 2 strict ordinal games in which there is a unique Pareto-inferior Nash equilibrium (Class I) or no pure-strategy equilibrium (Class II), and which also has a Pareto-optimal non-Nash “cooperative outcome,” P can induce this outcome if p is sufficiently high. This scenario helps to explain the observed outcomes of a Class I game modeling the 1962 Cuban missile crisis between the United States and the Soviet Union, and a Class II game modeling the 2015 conflict between Iran and Israel over Iran’s possible development of nuclear weapons.

Suggested Citation

  • Brams, Steven & Kilgour, Marc, 2017. "Stabilizing unstable outcomes in prediction games," MPRA Paper 77655, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:77655
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    References listed on IDEAS

    as
    1. Brams, Steven J., 2012. "Game Theory and the Humanities: Bridging Two Worlds," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262518252, April.
    2. Steven J. Brams, 1975. "Newcomb's Problem and Prisoners' Dilemma," Journal of Conflict Resolution, Peace Science Society (International), vol. 19(4), pages 596-612, December.
    3. Bryan Randolph Bruns, 2015. "Names for Games: Locating 2 × 2 Games," Games, MDPI, vol. 6(4), pages 1-26, October.
    Full references (including those not matched with items on IDEAS)

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    Cited by:

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    2. Valerio Capraro & Joseph Y Halpern, 2019. "Translucent players: Explaining cooperative behavior in social dilemmas," Rationality and Society, , vol. 31(4), pages 371-408, November.
    3. Jelnov, Artyom & Tauman, Yair & Zeckhauser, Richard, 2018. "Confronting an enemy with unknown preferences: Deterrer or provocateur?," European Journal of Political Economy, Elsevier, vol. 54(C), pages 124-143.

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    More about this item

    Keywords

    Noncooperative games; prediction; Nash equilibrium; 1962 Cuban missile crisis; 2015 Iran-Israel conflict;
    All these keywords.

    JEL classification:

    • C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
    • C78 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Bargaining Theory; Matching Theory
    • D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty

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