Promises

Definition

In game theory, particularly in the context of sequential games, promises refer to commitments made by players to take specific actions in the future, often influencing subsequent decisions. These promises can shape strategies and outcomes by creating expectations that guide player behavior, making them crucial for achieving cooperative outcomes or establishing credibility in competitive settings.

5 Must Know Facts For Your Next Test

1. Promises can establish trust between players in sequential games, leading to more cooperative strategies and potentially better outcomes for both parties.
2. The effectiveness of a promise depends on its credibility; if a player is known for breaking promises, other players may not believe their commitments.
3. In some cases, promises may not be enforceable, which can lead to strategic manipulation where a player might not follow through on their commitment.
4. Promises can alter the equilibrium of a game; by making a credible promise, a player might change the other player's best response strategy.
5. Players often use promises strategically to signal intentions and create a more favorable bargaining position during negotiations.

Review Questions

• How do promises influence strategic decision-making in sequential games?
  • Promises influence strategic decision-making in sequential games by creating expectations about future actions that can guide player behavior. When one player makes a promise, it can affect the choices available to other players, potentially leading them to cooperate or alter their strategies based on the anticipated actions of the promisor. This dynamic helps establish trust and can lead to more favorable outcomes for both parties if the promise is credible and upheld.
• Discuss the role of credibility in promises and how it affects players' strategies in sequential games.
  • Credibility is crucial when it comes to promises in sequential games because it determines whether other players will take those promises seriously. If a player has a history of breaking promises or lacks a way to enforce their commitments, other players may disregard their promises and choose strategies that optimize their own outcomes instead. Conversely, if promises are perceived as credible, they can significantly alter the strategies adopted by others, potentially leading to cooperative behavior and improved overall results.
• Evaluate the implications of broken promises on equilibrium outcomes in sequential games.
  • Broken promises can have significant implications for equilibrium outcomes in sequential games. When a promise is not fulfilled, it can shift players' expectations and lead them to adopt more aggressive or defensive strategies in response. This shift can disrupt established equilibria, potentially resulting in less efficient outcomes or increased conflict between players. Analyzing these implications highlights the importance of trust and reliability in strategic interactions, where maintaining credible commitments is essential for achieving desirable results.

Related terms

Credible Threat:

A threat that is believable and will be carried out if necessary, influencing the decisions of other players.

Backward Induction: A method used to solve sequential games by analyzing the game from the end to the beginning, determining optimal strategies at each stage.

Nash Equilibrium:

A situation in a game where no player can benefit by unilaterally changing their strategy, given the strategies of the other players.