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Scenario

"Assurance game" is a generic name for the game more commonly known as "Stag Hunt." The French philosopher, Jean Jacques Rousseau, presented the following situation. Two hunters can either jointly hunt a stag (an adult deer and rather large meal) or individually hunt a rabbit (tasty, but substantially less filling). Hunting stags is quite challenging and requires mutual cooperation. If either hunts a stag alone, the chance of success is minimal. Hunting stags is most beneficial for society but requires a lot of trust among its members.

Description

There are two pure strategy equilibria. Both players prefer one equilibrium to the other - it is both Pareto optimal and Hicks optimal. However, the inefficient 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

		Firm 2
		invest	don't
Firm 1	invest	10,10	-50,0
	don't	0,-50	0,0

General Form

		Player 2
		L	R
Player 1	U	a,w	b,x
	D	c,y	d,z

Where the following relations hold:
a > c >= d > b
w > x >= z > y

updated: 12 August 2005
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