10 - Game Theory

Summary

A foundation of the economic analysis of policy instruments and human behaviour is game theory. The present chapter presents some basics of game theory in a nutshell. The first section formulates the social dilemma described in Chapter 9 in the language of game theory, introducing in particular the prisoner’s dilemma. The following section defines the concept of Nash equilibrium and argues that players in the prisoner’s dilemma are trapped in an unfavourable Nash equilibrium. Two other popular games relevant in the context of biodiversity conservation are presented: the coordination game and the chicken game. The final section of the chapter outlines evolutionary game theory which analyses the evolution of behaviour. Of particular interest within the context of social and prisoner’s dilemmas is the evolution and stability of cooperation among agents.