"Assurance game" is a general name for the game more commonly known as "Stag Hunt." The French philosopher, Jean Jacques Rousseau, presented the subsequent circumstances. Two hunters can moreover jointly hunt a stag (an adult deer and quite large meal) or individually hunt a rabbit (tasty, but significantly less filling). Hunting stags is quite difficult and need mutual cooperation. If either hunts a stag alone, the chance of victory is negligible. Hunting stags is most advantageous for society but needs a ample of trust amid its members.
Description
There are two pure policy equilibria. Both players favor one equilibrium to the other - it is both Pareto optimal and Hicks optimal. However, the incompetent equilibrium is less risky as the payoff variance over the other player's strategies is lower. Specifically, one equilibrium is payoff-dominant while the other is risk-dominant.
Example
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Firm 2
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invest
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don't
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Firm 1
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invest
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10,10
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-50,0
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don't
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0,-50
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0,0
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General Form
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Player 2
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L
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R
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Player 1
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U
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I,V
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II,VI
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D
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III,VII
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IV,VIII
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Where the following relations hold:
I> III >= IV > II
V > VI >= VIII> VII