Games - Payoff dominant equilibrium

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	Games - Payoff dominant equilibrium

In game theory, a payoff dominant equilibrium is a Nash equilibrium that is pareto superior. That is, among all the Nash equilibrium of a game, the payoff dominant equilibrium pays at least as well as any other equilibrium for all players and strictly more for at least one.

Payoff dominance is a Nash equilibrium refinement introduced by Harsanyi and Selten (1988). It suggests that all other thing being equal individuals will tend to choose the Nash equilibrium that is payoff dominant over one that is not. For instance, consider the coordination game pictured here.

This game has two Nash equilibria, (C, C) and (D,D). It seems clear that were two individuals to play this game they would both choose (C, C), the payoff dominant equilibrium. All cases are not so clear, however. For an example of a case where individuals might choose a non-payoff dominant equilibria see the Stag hunt.

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