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Cooperation and self-interest: Pareto-inefficiency of Nash equilibria in finite random games.

ABSTRACT: The relative merits of cooperation and self-interest in an ensemble of strategic interactions can be investigated by using finite random games. In finite random games, finitely many players have finite numbers of actions and independently and identically distributed (iid) random payoffs with continuous distribution functions. In each realization, players are shown the values of all payoffs and then choose their strategies simultaneously. Noncooperative self-interest is modeled by Nash equilibrium (NE). Cooperation is advantageous when a NE is Pareto-inefficient. In ordinal games, the numerical value of the payoff function gives each player's ordinal ranking of payoffs. For a fixed number of players, as the number of actions of any player increases, the conditional probability that a pure strategic profile is not pure Pareto-optimal, given that it is a pure NE, apparently increases, but is bounded above strictly below 1. In games with transferable utility, the numerical payoff values may be averaged across actions (so that mixed NEs are meaningful) and added across players. In simulations of two-player games when both players have small, equal numbers of actions, as the number of actions increases, the probability that a NE (pure and mixed) attains the cooperative maximum declines rapidly; the gain from cooperation relative to the Nash high value decreases; and the gain from cooperation relative to the Nash low value rises dramatically. In the cases studied here, with an increasing number of actions, cooperation is increasingly likely to become advantageous compared with pure self-interest, but self-interest can achieve all that cooperation could achieve in a nonnegligible fraction of cases. These results can be interpreted in terms of cooperation in societies and mutualism in biology.

SUBMITTER: Cohen JE

PROVIDER: S-EPMC21404 | biostudies-other | 1998 Aug

REPOSITORIES: biostudies-other

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Project description:This paper investigates cooperation games in which poor agents do not benefit from cooperation with wealthy agents. They instead benefit from considering wealth relative to decision payoffs of fitness or wealth. Of concern is the effect of cooperation on participants, their rational self-interest and choices, and not the evolution of cooperation directly. The accumulation of fitness or wealth has been shown in the literature to lead to different optimal strategies for wealthy and poor players in Chicken games. The effect could have important explanatory power if it were more broadly applicable. First we empirically compare two published results, one involving the temptation parameter vs. degree of cooperation in Prisoner's Dilemma, and the other a surprising result from a public goods game with participants from different cultures, networks and wealth in which a fixed rather than relative payoff scheme was used. Using the temptation data to calibrate the public goods behavior suggests wealth factors can provide an explanation for the results. Second we show using simulation that adding a survival threshold to a wealth or fitness accumulating Iterated Prisoner's Dilemma produces a wealth relative effect. We clarify previous results to show the poor must avoid survival risk, regardless of whether this is associated with cooperation or defection. We do this by introducing the Farmer's Game, a simulation of Iterated Prisoner's Dilemma with wealth accumulation and a survival threshold. This is used to evaluate the Tit-for-Tat strategy and four variants. Equilibrium payoffs keep the game scaled to social relevance, with a fraction of all payoffs externalized as a turn cost parameter. Findings include poor performance of Tit-for-Tat near the survival threshold, superior performance of low risk strategies for both poor and wealthy players, dependence of survival of the poor near the threshold on Tit-for-Tat forgiveness, unexpected optimization of forgiveness without encountering a social dilemma, improved performance of a diverse mix of strategies, and a more abrupt threshold of social catastrophe for the better performing mix. Lastly we compare cooperating and non-cooperating societies using the simulation and discover disturbing connections between cooperation and familiar non-egalitarian wealth distribution patterns.

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Cooperation and self-interest: Pareto-inefficiency of Nash equilibria in finite random games.

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