Correlation and Cooperation
In our spring school devoted to Arrow’s economics, Menahem Yaari gave a talk entitled “correlation and cooperation.” It was about games as a model of people’s behavior, and Yaari made the following points:
It is an empirical fact that people (players in a game) act in a correlated way,
It is unscientific not to take this into account (although this is not taken into account in game theory and economics).
The prisoner’s dilemma
A basic example in game theory (which also played a central part in Yaari’s lecture) is the Prisoner’s dilemma. Let’s talk about this example a little, before getting to Yaari’s claims. Continue reading