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Risk Dominance and Payoff Dominance

Larry Samuelson released a study in 2016 titled Game Theory in Economics and Beyond, wherein he writes, “Perhaps the culmination of the refinements (in equilibria) program was Harsanyi and Selten’s (1988) theory of equilibrium selection, which indeed delivered unique outcomes, but is now most often cited for having introduced the distinction between risk dominance and payoff dominance.” This solution refinement concept of NE, combined with human psychology, asserts that when players or agents are presented with a robust decision tree, the dominant strategy naturally becomes the risk dominant one, where players or agents elect to base their decisions on . . .

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