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Pareto Efficiency in Games
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Improvement to Pareto Efficiency
In a coordination game, if players choose strategies that lead to a higher payoff for both, it's an improvement toward Pareto efficiency compared to a lower joint payoff scenario.
Pareto Inferiority
In a Battle of the Sexes game, if both players end up in an outcome that is not their top preference, but one could be made better off without harming the other, it would be Pareto inferior.
Pareto Frontier
In an ultimatum game, the Pareto frontier includes all possible divisions of the resource where the proposer and responder's payoffs cannot both be increased simultaneously.
Definition of Pareto Efficiency
In the Prisoner's Dilemma, a Pareto efficient outcome is where both prisoners remain silent, as any other outcome would harm at least one prisoner without any benefit to the other.
Non-Pareto Optimal Equilibrium
In the game of Chicken, both players swerving is not Pareto optimal because the equilibrium where one swerves and the other stays would make one player better off without harming the other.
Individual Rationality and Pareto Efficiency
In the public goods game, individual rationality leads players to contribute less, which may result in a Pareto inefficient outcome, as mutual cooperation could benefit all players more.
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