I'm in a game theory class and have a question: Which of the four outcomes are Strongly Pareto Efficient?
The outcomes are:
3,1
2,2
6,3
8,0
I'm confused about the definition of SPE. I'm guessing for this problem the correct answer is 6,3. But what if the outcomess were changed to:
3,1
2,2
6,3
8,2
Would 8,2 be the SPE payoff because 8+2=10 which is higher than 6+3=9? Or is this not the case because even though player 1 gets a better payoff by going from 6 to 8, player 2 becomes worse off by going down from 3 to 2.
So basically my question is: Is SPE determined by adding the payoffs of all the players together to determine the overall payoff...or is it determined by the most "mutual" gain by all players...that is that one player it is the highest payoff for player 1 that doesn't take away from player 2's payoff and vice versa.
The outcomes are:
3,1
2,2
6,3
8,0
I'm confused about the definition of SPE. I'm guessing for this problem the correct answer is 6,3. But what if the outcomess were changed to:
3,1
2,2
6,3
8,2
Would 8,2 be the SPE payoff because 8+2=10 which is higher than 6+3=9? Or is this not the case because even though player 1 gets a better payoff by going from 6 to 8, player 2 becomes worse off by going down from 3 to 2.
So basically my question is: Is SPE determined by adding the payoffs of all the players together to determine the overall payoff...or is it determined by the most "mutual" gain by all players...that is that one player it is the highest payoff for player 1 that doesn't take away from player 2's payoff and vice versa.