Dictionary :: Games

Glossary of game theory terms.

Pure Coordination Game

Scenario

Two firms must simultaneously elect a technology to use for their compatible products. If the firms adopt different standards, few sales result. A common standard leads to higher sales. One technology is significantly preferred by consumers over the other. Thus, if the companies can standardize on the preferred technology, each obtains maximal profits. This is also called a Pareto coordination game.

Description

There are two pure strategy equilibria. Both firms prefer the same equilibrium which Pareto dominates the other. A mixed strategy equilibrium also exists.

Example

Firm 2
good bad
Firm 1 good 5,5 0,0
bad 0,0 3,3

General Form

Player 2
L R
Player 1 U a,w b,x
D c,y d,z
Where the following relations hold:
a>d>b; a>d>c
w>z>y; w>z>x

updated: 12 August 2005
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