So in this session, we're going to deal with a question or the problem of how to
achieve cooperation between individual profit maximizers.
The mechanisms we're going to take a closer look at are, repeated games.
So we play a prisoner's dilemma not just a single time, but a repeated number of
times. And we'll look at commitment, where we
can settle on a course of action before the other firm has done it.
We've just learned that companies that face a prisoner's dilemma or play a
coordination game, are often better off if they cooperate with each other or,
somehow, can coordinate their behavior. Now, this sounds simple in theory, but
it's hard to sustain given that our firms are selfish, individual, profit
maximizers. So if games are played repeatedly or
players commit to certain strategies, this can help enabling cooperation.
So in the following videos, we'll have a closer look at these mechanisms.
So stay tuned and see you in a second.