ABSTRACT
In our discussion of noncooperative, one-time, static games with complete information we were confronted with a bit of a dilemma. We found that in games involving pure strategies, a unique Nash equilibrium may not exist, or there may be multiple Nash equilibria. When this occurs, it is diffi cult to predict the outcome of the game. In a previous chapter we learned that in games involving multiple Nash equilibria, a unique focal-point equilibrium may exist if the players share a common “understanding” of the problem. Unfortunately, there is no guarantee that this will be the case. In such cases, the decision maker may adopt a strategy based on some arbitrary selection criteria, such as the maximin or minimax regret decision rules. The reader may have found this somewhat arbitrary approach less than satisfying. Are we to conclude from this that game theory is of limited usefulness when analyzing real-world strategic situations?
