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The Experimental Game Basic Game Theory for Natural Resource Management. Stephan Dohrn, CAPRi. Outline. Terminology Game Structures Empirical Examples, and Game-Theoretic Results A Few Games in Detail Conclude with things we haven’t touched on, but may be relevant. Terminology.

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outline
Outline
  • Terminology
  • Game Structures
  • Empirical Examples, and Game-Theoretic Results
  • A Few Games in Detail
  • Conclude with things we haven’t touched on, but may be relevant
terminology
Terminology
  • Externalities
  • Non-Cooperative Game Theory vs. Cooperative Game Theory
  • Strategy Set & Actions
  • Equilibria (F&T)
terminology cont d
Terminology, cont’d
  • Public Goods: Goods or services whose benefits are non-excludable and non-rival (C&S).
  • “Impure” Public Goods: Goods or services whose benefits are partially excludable and/or rival
  • Common Pool Resources:– partial excludability, rivalry
  • Social Optimum/Joint maximization
classification of goods
Classification of Goods

Rivalry

High

Low

Excludability

Common Pool Resources

Public Goods

No

Club Goods

Private Goods

Yes

what is game theory
What is Game Theory
  • Formalized language to analyze decision-making situations.
    • Results depend on decisions AND estimated probabilities of the players
    • Players are conscious about the interdependency.
    • Every player takes into account above conditions.
  • Game theory in NRM?
incentives and interdependency
Incentives and Interdependency

Cooperate Not Cooperate

R=3

T=4

Cooperate

S=0

R=3

P=1

S=0

Not Cooperate

P=1

T=4

T=Temptation; R=Reward; P=Penalty; S=Sucker

incentives and interdependency8
Incentives and Interdependency
  • Incentives to Cheat:

Not Cooperate

Cooperate

R

T

  • NC, c – C, c > 0

Cooperate

S

R

  • Incentives not to be Suckered:

P

S

Not Cooperate

  • NC, nc – C, nc > 0

P

T

T=Temptation; R=Reward; P=Penalty; S=Sucker

recap a game is described by
Recap: A Game is described by
  • The set of players N = {1,...n};
  • The strategy Space S, defined as the set of all possible combinations of strategies s = {s1, ..sn} of the single players
  • The utility function u = {u1, ..un}
  • In case of cooperative game theory also the (implicit) rules.
a few game structures
A Few Game Structures
  • Prisoner’s Dilemma:
  • Assurance Game:
  • Chicken Game:
  • Fully Privileged (or Un-Privileged):

NC, c – C, c > 0 and NC, nc – C, nc > 0

NC, c – C, c < 0 and NC, nc – C, nc > 0

NC, c – C, c > 0 and NC, nc – C, nc < 0

NC, c – C, c < 0 and NC, nc – C, nc < 0 and C, c > NC, nc

NC, c – C, c > 0 and NC, nc – C, nc > 0 and C, c < NC, nc

wait what s the point again
Wait, what’s the point again?
  • Evaluate: Is group optimally managing the natural resource base? If not, is it because of individual incentives? If so, organizational structure and institutional design need to be tailored to incentive structure
  • Technology Adoption: Must consider management of natural resources and impact on adoption. Could explain a lot!
things we haven t discussed
Things We Haven’t Discussed
  • Asymmetric Externalities (upstream/ downstream users of river; beekeeper/orchard grower; crops/livestock)
  • Repeated & Dynamic Games – Prisoner’s Dilemma “is transformed” into an Assurance Game, for instance. Dynamic externalities likely to be important for soil erosion control, reforestation, etc.
  • Uncertainty: Can ‘o Worms. Undertaking any activities to improve returns in highly variable environments will be lower than in more stable environments; but exploitation rates will be lower, too.
things we haven t discussed13
Things We Haven’t Discussed
  • Discrete Games: Basically, these are pretty easy, and much more in extant literature. Lump-sum investments likely to have Assurance Game incentive structure, but you can get nearly anything.
  • Different Game Forms: Weakest Link, Strongest Link (these likely to result from Discrete Games, though)
  • More Than One Strategic Choice Variable: Examples include animal health and stock densities; reforestation and soil erosion control; road maintenance on fishing effort, etc.