Game Theory: A Critical Introduction

By Shaun P. Hargreaves Heap; Yanis Varoufakis | Go to book overview

4

BARGAINING GAMES

4.1INTRODUCTION

Liberal theorists often explain the State with reference to state of nature. For instance, within the Hobbesian tradition there is a stark choice between a state of nature in which a war of all against all prevails and a peaceful society where the peace is enforced by a State which acts in the interest of all. The legitimacy of the State derives from the fact that people who would otherwise live in Hobbes’s state of nature (in which life is ‘brutish, nasty and short’) can clearly see the advantages of creating a State. Even if a State had not surfaced historically for all sorts of other reasons, it would have to be invented.

Such a hypothesised ‘invention’ would require a cooperative act of coming together to create a State whose purpose will be to secure rights over life and property. Nevertheless, even if all this were common knowledge, it would not guarantee that the State will be created. There is a tricky further issue which must be resolved. The people must agree to the precise property rights which the State will defend and this is tricky because there are typically a variety of possible property rights and the manner in which the benefits of peace will be distributed depends on the precise property rights which are selected (see Box 4.1).

In other words, the common interest in peace cannot be the only element in the liberal explanation of the State, as any well-defined and policed property rights will secure the peace. The missing element is an account of how a particular set of property rights are selected and this would seem to require an analysis of how people resolve conflicts of interest. This is where bargaining theory promises to make an important contribution to the liberal theory of the State because it is concerned precisely with interactions of this sort.

To be specific, the bargaining problem is the simplest, most abstract, ingredient of any situation in which two (or more) agents are able to produce some benefit through cooperating with one another, provided they agree in advance on a division between them. If they fail to agree, the

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Game Theory: A Critical Introduction
Table of contents

Table of contents

  • Title Page iii
  • Contents v
  • List of Boxes viii
  • Preface xi
  • 1 - An Overview 1
  • 2 - The Elements of Game Theory 41
  • 3 - Dynamic Games 80
  • 4 - Bargaining Games 111
  • 5 - The Prisoners’ Dilemma 146
  • 6 - Repeated Games and Reputations 167
  • 7 - Evolutionary Games 195
  • 8 - Watching People Play Games 236
  • Postscript 260
  • Notes 261
  • Bibliography 265
  • Name Index 273
  • Subject Index 276
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