In a recent article in this journal, Duijf claims to have proved that team reasoning can be viewed as a payoff transformation. His formalization mimics team reasoning but ignores its essential agency switch. The possibility of such a payoff transformation was never in doubt, does not imply that team reasoning can be viewed as a payoff transformation, and makes no sense in a game in which payoffs represent players’ utilities. A theorem is proved here that a simpler and more intuitive payoff transformation can mimic any theory that predicts what strategies players will choose in a well-defined game.

This paper introduces the concept of institutional resilience based on a population game. Agents in an economy are randomly matched to play a coordination game with two strategies, cooperate and defect. A breach of contract can be adjudicated in court. Agents can update their strategy, which is modelled using the replicator dynamic. In this context, cooperation is defined as the informal institution, whereas the legal system (contract law) constitutes the formal institution. Institutional resilience is defined by how the formal institution of a functioning legal system complements the informal institution of cooperation in a dynamic way. In the wake of an adverse exogenous shock, the formal institution can prevent a total breakdown of cooperation in the population.

We build on Hart and Holmstrom (2010) to analyze the strategic choice of organizational form among wine producers. They claim that a firm's organizational form, when agreed upon competitively, conditions the sense of entitlement of the involved parties. The sense of entitlement determines their feeling of grievance for the outcome of the contract and, if so, their shading efforts by partially withholding consummate performance, creating deadweight losses. We consider two main organizational forms: non-integration, where growers interact in the winemaking process and can highlight the quality of their individual contributions, and integration, where individual contributions to the process may not be explicitly acknowledged and the winemaker cannot exert quality control over the production chain. We present a formal coordination model that illustrates how cooperatives and private firms can coexist within a market. Furthermore, given the reasonable parameter constraints, it illustrates how an integrated cooperative can obtain a higher social surplus than a non-integrated private firm. (JEL Classifications: C72, L22, L66)

The search for extra-terrestrial intelligence (SETI) has been performed principally as a one-way survey, listening of radio frequencies across the Milky Way and other galaxies. However, scientists have engaged in an active messaging only rarely. This suggests the simple rationale that if other civilizations exist and take a similar approach to ours, namely listening but not broadcasting, the result is a silent universe. A simple game theoretical model, the prisoner's dilemma, explains this situation: each player (civilization) can passively search (defect), or actively search and broadcast (cooperate). In order to maximize the payoff (or, equivalently, minimize the risks) the best strategy is not to broadcast. In fact, the active search has been opposed on the basis that it might be dangerous to expose ourselves. However, most of these ideas have not been based on objective arguments, and ignore accounting of the possible gains and losses. Thus, the question stands: should we perform an active search? I develop a game-theoretical framework where civilizations can be of different types, and explicitly apply it to a situation where societies are either interested in establishing a two-way communication or belligerent and in urge to exploit ours. The framework gives a quantitative solution (a mixed-strategy), which is how frequent we should perform the active SETI. This frequency is roughly proportional to the inverse of the risk, and can be extremely small. However, given the immense amount of stars being scanned, it supports active SETI. The model is compared with simulations, and the possible actions are evaluated through the San Marino scale, measuring the risks of messaging.

In this paper we analyze players' long-run behavior in evolutionary coordination games with imperfect monitoring in a large population. Players can observe signals corresponding to other players' unseen actions and use the proposed simple or maximum likelihood estimation algorithm to extract information from the signals. In the simple learning process we find conditions for the risk-dominant and the non-risk-dominant equilibria to emerge alone in the long run. Furthermore, we find that the two equilibria can coexist in the long run. In contrast, the coexistence of the two equilibria is the only limit distribution under the maximum likelihood estimation learning algorithm. We also analyze the long-run equilibria of other 2x2 symmetric games under imperfect monitoring.

In this paper we study players' long-run behaviors in evolutionary coordination games with imperfect monitoring. In each time period, signals corresponding to players' underlying actions, instead of the actions themselves, are observed. A boundedly rational quasi-Bayesian learning process is proposed to extract information from the realized signals. We find that players' long-run behaviors depend not only on the correlations between actions and signals, but on the initial probabilities of risk-dominant and non-risk-dominant equilibria being chosen. The conditions under which risk-dominant equilibrium, non-risk-dominant equilibrium, and the coexistence of both equilibria emerges in the long run are shown. In some situations, the number of limiting distributions grows unboundedly as the population size grows to infinity.

This paper analyzes players’ long-run behavior in an evolutionary model with time-varying mutations under both uniform and local interaction rules. It is shown that a risk-dominant Nash equilibrium in a 2 × 2 coordination game would emerge as the long-run equilibrium if and only if mutation rates do not decrease to zero too fast under both interaction methods. The convergence rates of the dynamic system under both interaction rules are also derived. We find that the dynamic system with local matching may not converge faster than that with uniform matching.