18.2 : Cooperative vs. Non-Cooperative Games

In game theory, games are scenarios where players make decisions to maximize their outcomes while considering the possible actions of others. These games are classified into two main types: non-cooperative and cooperative.

In non-cooperative games, players act independently, without forming any agreements or commitments. Each player focuses on their own outcome, taking into account what others might do. This is often done by devising individual strategies, which are plans or actions that a player takes to achieve their desired outcome. An example of this is two rival tech companies launching new products at the same time. Each company independently sets its prices and marketing strategies, aiming to gain a competitive edge. While neither company cooperates, each must anticipate the other's decisions to succeed.

In cooperative games, players work together to achieve a better outcome for the group. They form agreements that benefit all participants involved. A typical example is seen in labor unions, where independent workers choose to collectively negotiate wages and working conditions with their employer. By forming a union, the workers cooperate to achieve a better overall result than they could by acting individually, thereby ensuring fair wages and benefits for the group.

The key difference between non-cooperative and cooperative games is whether or not formal agreements are made. In non-cooperative games, players rely solely on their own strategies, while in cooperative games, collaboration allows players to achieve shared benefits.

In summary, non-cooperative and cooperative games offer valuable insights into strategic decision-making. Understanding these two types of games is crucial in fields such as economics, business, and politics, where decision-making often involves balancing personal gain with potential cooperation.