Risk Aversion and Coordination in a Simple Stag Hunt Game: Agent Based Modelling

Abstract

I study the emergence of coordination using a simple stag hunt game at both the individual and population levels. Consistent with the conjecture that coordination is difficult to attain in the n-player game, agents play risk dominant strategy when the number of matching partners increases. Because, at the individual level, the cooperators risk the cooperation cost if the partners defect.

To avoid risky choice, agents choose always defect. Emergence of coordination happens when the cost is reduced and therefore, the agents are less aversed to risky choice. This encourages more payoff dominant strategy than risk dominant strategy even in n-player games at the population level.

Keywords: Cooperation cost, Coordination, Defection, Risk aversion

JEL Classification: D71, C7, C92