Farsightedness in Games: Stabilizing Cooperation in International Conflicts
36 Pages Posted: 5 May 2018 Last revised: 14 Dec 2018
Date Written: April 19, 2018
We show that a cooperative outcome—one that is at least next-best for the players—is not a Nash equilibrium (NE) in 19 of the 57 2 x 2 strict ordinal conflict games (33%), including Prisoners’ Dilemma and Chicken. Auspiciously, in 16 of these games (84%), cooperative outcomes are nonmyopic equilibria (NMEs) when the players make farsighted calculations, based on backward induction; in the other three games, credible threats induce cooperation. More generally, in all 2-person and n-person games, if players’ preferences are strict, farsighted calculations stabilize at least one Pareto-optimal NME. We illustrate the choice of NMEs that are not NEs by two cases in international relations: (i) no first use of nuclear weapons, chosen by the protagonists in the 1962 Cuban missile crisis and since adopted by some nuclear powers; and (ii) the 2015 agreement between Iran, and a coalition of the United States and other countries, that has forestalled Iran’s possible development of nuclear weapons.
Keywords: Game Theory, Theory of Moves, n-Person Games, International Relations
JEL Classification: C70, F50, D74
Suggested Citation: Suggested Citation