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T. C. Schelling

The Review of Economics and Statistics, Vol. 41, No. 3. (Aug., 1959), pp. 213-224.

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Fri Apr 4 06:16:57 2008

T h e Review of Economics and Statistics

VOLUME

X LI AUGUST1959 NUMBER3

IN GAME THEORY

T. C. Schelling

pure "moveless" bargaining game analyzed

by Nash, Harsanyi, Luce and Raiff a, and others

monly these operations are sketched in by ref-

erence to the notion of "binding agreements"

and the notion of free communication in the

may not exist or, if it does, is of a different char-

process of reaching agreement. Thus, to say that

acter from what has been generally supposed; two players may divide $100as soon as they can

the point of departure for this argument is the agree on how to divide it, and that they may

operational meaning of "agreement," a concept discuss the matter fully with each other, is

that is almost invariably left undefined. The generally considered sufficient to define a game.2

second part of the paper argues that symmetry A game of this sort is symmetrical in its move

in the solution of bargaining games cannot be structure, even though it may be asymmetrical

supported on the notion of "rational expecta- in the configuration of payoffs. The two players

tions"; the point of departure for this argument have identical privileges of communication, of

is the operational identification of irrational refusing offers, and of reaching agreement. If

expectations. instead of dividing $100the players are to agree

on values X and Y contained within a boundary,

the payoff function may not be symmetrical but

the move structure is. Harsanyi, to emphasize

The logical structure of a zero-sum game is

this, has even added explicitly the postulate of

completely defined by the game's payoff matrix

symmetrical moves : "The bargaining parties

or function; and, if one is attracted to the mini-

follow identical (symmetric) rules of behavior

max solution, the payoff matrix contains every-

(whether because they follow the same prin-

thing significant in the game. I n the case of the

ciples of rational behaviour or because they are

tacit (non-cooperative) non-zero-sum game,

though not all of the essentials of the game are subject to the same psychological laws) ." (Op.

cit., 149.)

necessarily contained in the payoff matrix, the

What I want to do is to look a t this notion of

entire move structure is. There are no moves

"agreement" on the asumption of perfect sym-

in this game except the unilateral selection of

metry in the move structure of the game, paying

strategies, and the timing of such selection is

close attention to the "legal details" of the bar-

immaterial since there is no outcome until both

gaining process. We m u s ~ a l s olook at the mean-

players have selected. But the non-tacit (co-

ing of "nonagreement." Since any well-defined

operative) non-zero-sum game is not defined by

game must have some rule for its own termina-

its payoff matrix; the operations by which

choices are made must still be specified. Com- Luce and Raiffa, in effect, define cooperative two-person

games by reference to a payoff matrix and the following

John F. Nash, "The Bargaining Problem," Econornetrica, three stipulations:

xvnr (April 1g50), 155-62, and "Two-Person Cooperative (i) All preplay messages formulated by one player are

Games," Econornetrica, XXI (January 1953)~128-40; John transmitted without distortion to the other player.

Harsanyi, "Approaches to the Bargaining Problem Before (ii) All agreements are binding, and they are enforceable

and After the Theory of Games: a Critical Discussion of by the rules of the game.

Zeuthen's, Hicks', and Nash's Theories," Econornetrica, (iii) A player's evaluations of the outcomes of the game

x x ~ v(April 1956), 144-57; R. Duncan Luce and Howard are not disturbed by these preplay negotiations.

Raiffa, Games and Decisions (New York, 1957)~114ff. Games and Decisions, I 14.

T H E REVIEW O F ECONOMICS AND STATISTICS

tion, let us look a t the rules for termination corded in some manner that will be visible to the

first.3 referee when the bell rings. Perhaps he keeps

If we are to avoid adding a whole new dimen- it written on a blackboard that the other player

sion to our payoff matrix, in the form of dis- can see; perhaps he keeps it in a sealed enve-

count rates, we must suppose that the game is lope that is surrendered to the referee when the

terminated soon enough so that nothing like the bell rings; perhaps he keeps it punched into a

interest rate enters the picture. We do not want private keyboard that records his current offer

to have to consider the time a t which agreement in the referee's room. When the bell rings the

is reached, in addition to the agreement itself. blackboard is photographed, or the envelope

This is not only a matter of convenience; the surrendered, or the keyboard locked, so that the

game ceases to be moveless except in very spe- referee need only inspect the two "current" of-

cial cases, unless we make this stipulation. For fers as they exist a t midnight to see whether

if the players' time preferences take any shape they are compatible. If they are compatible,

except that of a continuously uniform discount the gains are divided in accordance with the

rate, the game itself changes with the passage "agreement"; if the two players have jointly

of time, and a player can, in effect, change the claimed more than is available, "disagreement"

game itself by failing to reach agreement. The exists and the players get nothing. (Defer, for

notion of a continuously uniform discount rate a moment, ruling on what happens if the two

is probably far too special to treat as a neces- players together have claimed less than the total

sary condition, and anyway has not been made available -whether they get as much as they

an explicit postulate in the models under exami- have claimed or get nothing for lack of proper

nation; so we must assume that the game is agreement. And, in what follows, it will not

somehow gotten over with. matter whether an exhaustive agreement reached

Perhaps the simplest way to terminate the before midnight -i.e., compatibility of the cur-

game is to have a bell ring at a time specified in rent offers occurring before midnight -termi-

advance. There are other ways, such as having nates the game.)

the referee roll dice every few minutes, calling There are other ways of defining "agreement"

off the game whenever he rolls boxcars. (We in terms of the operations by which it is reached

could have the game terminate after a specified or recorded; but if we adhere to the notion of a

number of offers have been refused, but this perfectly symmetrical move structure they will

would change the character of the game by generally, I think, have the property that I am

making certain kinds of communication "real trying to single out for attention. That property

moves" that leave the game different from what is this. There must be some minimum length of

it was before, and perforce lead us into such time that it takes a player to make, or to change,

tactics as the exhaustion of offers.) his current offer. (For simplicity again, let us

For simplicity, suppose that the game will be suppose that the same operation either makes

terminated a t a specified time, known in ad- an offer or changes it, so that we may always

vance to the players, and for convenience let us assume that a '(current offer" exists.) There

call that final moment "midnight." If agree- must then be some critical moment in time, a

ment exists when the midnight bell rings, the finite period before the midnight bell rings, that

players divide the gains in the way they have is the last moment a t which a player can begin

agreed; if no agreement exists, the players re- the operations that record his final offer. That

ceive nothing. is, there is some last moment before the bell

Next, what do we mean by "agreement"? rings, beyond which it is too late to change one's

For simplicity, suppose that each player keeps existing offer. Under the rules of the game and

(or may keep) his current "official" offer re- the rationality postulate both players know this.

And by the rule of symmetry this moment must

8The model discussed here is quite abstract, artificial, and

unrealistic; but it does have the advantage of helping to test be the same for both players.

whether even in an artificially abstract model it is fruitful to From this follows the significant feature. The

postulate perfect symmetry in the move structure and to last offer that it is mechanically and legally

treat asymmetry as a special case, symmetry as the more

general case. possible for a player to make is one that he

FOR T H E ABANDONMENT OF SYMMETRY I N GAME THEORY 21.5

necessarily makes without knowing what the From this it follows that the solution of the

other player's final offer is going to be; and the cooperative game must be identical with that of

last offer that a player can make is one that the the corresponding tacit game (if the latter has

other player cannot possibly respond to in the a predictable and efficient solution). I t must,

course of the game. Prior to that penultimate because the tacit game comes as an inevitable,

moment no offer has any finality; and a t that mechanical sequelTo the cooperative game.

last moment players either change or do not At this point it looks as though the coopera-

change their current offers, and whatever they tive feature of the game is irrelevant; the play-

do is done in complete ignorance of what the ers really need not show up until I I :59 ; in fact

other is doing, and is final.4 they do not need to show up at all. The preplay

This must be true. If either could get a communication and ability to reach binding

glimpse of the other's final offer in time to do agreements, which were intended to character-

anything about it, or if either could give the ize the game, prove to be irrelevant; the co-

other a glimpse of his own final offer in time operative game as a distinct game from the tacit

for the other to respond, it is not -and is game does not exist.6

known to be not-a final offer.5 But this conclusion is unwarranted. First, the

But now we have reached an important con- corresponding tacit game may not have a con-

clusion about the perfectly move-symmetrical fidently predicted efficient s ~ l u t i o n .More

~ than

bargaining game. I t is that it necessarily gives that, certain details of the cooperative game that

way, a t some definite penultimate moment, to a might have seemed to be innocuous from the

tacit (non-cooperative) bargaining game. And point of view of explicit negotiation may affect

each player knows this. ' I n his 1953 article, "Two-person Cooperative Games,"

The most informative way to characterize the Nash presents a model that is explicitly tacit in its final

stage. The model's relation to the cooperative game was

game, then, is not that the players must reach heuristic: it was to help to discover what might constitute

overt agreement by the time the final bell rings "rational expectations" (and hence the indicated rational

or forego the rewards altogether. I t is that they outcome) in the corresponding cooperative game. The ar-

gument of the present paper is that the relation is likely t o

must reach overt agreement by a particular be mechanical rather than intellectual if a symmetrical move

(and well identified) penultimate moment - structure is strictly adhered to, and that with strict sym-

metry it is difficult, perhaps impossible, to define the corre-

when the "warning bell" rings - or else play sponding non-tacit game that was the ultimate subject of

the tacit variant of the same game. study.

Each player must be assumed to know this I t should be emphasized that bargaining-game solutions

that (like the Nash and Harsanyi solutions) depend on a

and may, if he wishes, by simply avoiding overt clearly recognized zero point - i.e. on an unambiguous out-

agreement, elect to play the tacit game instead. come that reigns in the absence of overt agreement -cannot

And if we assume (for the moment) that the necessarily be applied to a cooperative game that is based

on a matrix of choices. A matrix (unless perhaps all payoffs

tacit game has a clearly recognized solution, and are zero except in the diagonal) does not have a zero point

that the solution is efficient, each player has a defined by the rules. There is consequently no "normal

pure minimax behavior strategy during the ear- form" consisting of a convex region and associated zero point

unless there is available a fully adequate theory that "solves"

lier stage. Either player can enforce this tacit the tacit game (and does so in a manner that the players can

solution by abstaining from agreement until the take for granted). One may, following Luce and Raiffa

warning-bell rings; neither can achieve any- (e.g., page 137) take the players' "security levels" (maximin

values) as the zero point; but this is either arbitrary or based

thing better from a rational opponent by verbal on the hypothesis that, left to themselves, the players could

bargaining. succeed in doing no better than this in the tacit game. The

latter hypothesis, especially where there are pure-strategy

'Incidentally, the argument is unaffected by supposing efficient points (as in Braithwaite's game, and as in the

that a player can change his offer "instantaneously" as long Luce-Raiffa matrix discussed in note zo below), is a weak

as we keep the symmetrical rule that both can do it "equally hypothesis that can be empirically refuted; it assumes that

instantaneously" as the final bell rings. rational players are incapable of correlating strategies with-

There is a mechanical assumption here that in the proc- out communicating, while in fact this is something they often

ess of making a new offer one can stop and start over. The can do even in the face of conflicting preferences. (This point

case is slightly more complicated if an offer started one and is taken u p again in note 20.) The potential ambiguity of

one-half minutes before midnight is necessarily the last offer the zero point is the issue between Harvey Wagner and John

because the process cannot be started again until a minute Harsanyi in the former's, "Rejoinder on the Bargaining

has passed and by then the critical point has been passed. Problem," Southern Economic Journal, xxw (April 1958),

This case will be looked at again below. 48-82.

2 16 T H E REVIEW O F ECONOMICS AND STATISTICS

the character of the tacit game; similarly, pre- point yields zero for both players. Thus the

play communication that has no binding effect variant game, which seemed to differ only in-

on the players themselves may also affect the consequentially, is in fact drastically different

character of the tacit game. For example, just from the original game; but it does not appear

consider the following variant of the cooperative so until we have identified the terminal tacit

game. game as a dominating influence.'

Instead of saying that the players may divide T o take another example, suppose there are

a set of rewards if they can reach agreement on IOO individual objects to be divided and that,

an exhaustive division, let us say that the play- although they are fungible as far as value is

ers may divide a set of rewards to the extent concerned, the agreement must specify precisely

that they have reached agreement on a division; which individual items go to which individual

they may divide such portion of the available players. If the rules require that full and ex-

rewards as they have already agreed on by the haustive agreement be reached, then in the tacit

time the bell rings. If, for example, there are game the players are dependent on their ability

one hundred indivisible objects and they have not only to divide the total value of the objects

reached agreement on how to divide eighty of in coordinated fashion but to sort out the IOO

them when the bell rings, the twenty items in individual objects into two piles in identical

dispute revert to the house, while the eighty on fashion. If, then, one of the players has de-

which agreement was reached will be divided in manded specific items worth 8 0 per cent of the

accordance with the agreement.s total and the other player has refused, the for-

Now, in the explicit-bargaining (cooperative) mer has an advantage in the tacit game. The

case, if we had already concluded that there was only extant proposal for dividing the IOO ob-

an efficient solution to this game - i.e., that the jects is the one player's specification of 80 that

players would in fact reach an exhaustive agree- would satisfy him; the chances of their concert-

ment -we should probably have considered ing identically on any other division of the IOO

this reformulation of the problem inconsequen- objects, equal or unequal between them, may be

tial. I t only says, in effect, that bargaining so small that they are forced for the sake of

should take the form of each player's writing agreement into accepting the only extant pro-

down the totality of his claim and that conces- posal in spite of its bias. Thus preplay com-

sions shall take the form of each player's delet- munication has tactical significance in that it

ing items from his list of claims, with full agree- can affect the means of coordination once the

ment being reached when no more items are in tacit stage of the game has been reached.

conflict on the lists of claims. But when we If now, in considering the tactical implica-

look at the tacit case, the game is drastically tions of this last point, we insist on a rule of sym-

altered by this reformulation. The tacit game metrical behavior, we must conclude that if

now has a perverse incentive structure. There either player opened his mouth to drown out

is no rational reason for either player to demand what the other was about to say, he would al-

less than the whole of the available reward; wavs find the other player

- - also with his mouth

each knows this and knows that the other knows

might seem that we can draw a by-product from the

it' There is incentive reduce analysis here, namely, the observation that in order to set

because any residual dispute costs the player no up a "truly" cooperative (non-tacit) game, the legal defini-

more than he would losiif he claim tion of agreement must be such as to make the ultimate tacit

game perverse, so that the players must reach binding agree-

to the The sing1e ment before the warning bell or suffer complete loss. But

there is still a problem. Assuming that the players themselves

In the case of a single divisible object like money, the can define "agreement" for purposes of agreement prior to

corresponding rule might be that they divide the money in the final bell, and that the perverse rule only governs the

accordance with their offers after the house has removed the definition of "agreement" at termination if no prior agree-

"overlap." Each player obtains as much as the other im- ment exists, we must now provide (or assume the players to

plicitly accords him; if one is demanding 65 per cent of the provide) an operational definition of agreement. If it is like

money at the end of the game, and the other 5 5 per cent, the our earlier definition, all they accomplish is to make the

second has been accorded 35 per cent and the first 45 per perverse cooperative game into a benign one, one minute

cent; these amounts are outside the range of dispute and shorter, which is equivalent to a tacit game two minutes

constitute the LLagreement." shorter than the original.

FOR T H E ABANDONMENT O F SYMMETRY I N GAME THEORY 217

open, both knowing that if either spoke the Is the nondiscriminatory, move-symmetrical

other would be found to be speaking, neither game a ('general" game, one that gets away from

able to hear the other, and so on. I n other words, "special cases"? Or is it a special, limiting case

the assumption of complete symmetry of be- in which the most interesting aspects of the co-

to preclude the very kind of action that might I t should be emphasized that the fruitful al-

have seemed to enrich the game at the stage of ternative to symmetry is not necessarily the

But by now we have certainly pressed the try, admitting both symmetry and asymmetry as

perfect move-symmetrical game as far as is possibilities without being committed to either

worthwhile.1 We could go on to analyze this as a foregone conclusion.

game in more detail, considering such things as An illustration may help. Suppose we were to

alternative ways of terminating the game or of analyze the game in which there is $100at the

defining "agreement," etc.; it seems more worth- end of the road for the player who can get there

while, however, to raise at this point the question first. This game of skill is not hard to analyze:

of whether the perfectly "moveless" or "move- the money goes to the fastest, barring accidents

symmetrical" game is a profitable one to study. and random elements. We can predict rational

l o o n e detail may be worth pursuing, in line with an

behavior (running) and the outcome (money

earlier footnote. Suppose that it takes one minute to make to the fastest). Ties will occasionally occur;

or change an offer and (in contrast to the earlier version) but they will occur a t the end of a race, not be

that the process of recording a new offer, once started, can-

not be stopped before it is completed. Under this procedure, taken for granted a t the outset. We need an

any offer initiated during the next to last minute of the game auxiliary rule to Cover ties, but it would not

is one's final offer. If this final offer cannot be communi- dominate the game or the analysis.

cated to the other player before the expiration of the minute,

the game is essentially the same as before; "simultaneous" the same game played in a

now means within a minute of each other for practical pur- tion in which everybody can run exactly as fast

poses, and again neither can see the other's final offer as he anybody else, and everybody knows it. N~~

initiates his own, no matter what time during the final min-

ute the offers are initiated. But suppose one punches his what race ends in a tie, the

offer into a visible board which remains locked for one auxiliary rules are all that matter. But since a

minute while the offer is recorded, so that the other player tie is foregone conclusion, why would they

can see one's offer in a few seconds although one cannot

initiate a change until the minute's delay is up. (And sup- run?

pose that neither can make himself visibly incapable of seeing The perfectly move-symmetrical cooperative

the other's offer once it is so recorded.) In this case, if the game little like that foot race. B ~ ~ -

two offers during that final minute are not simultaneous, the

player who moves second makes his final offer in full knowl- gaining in the one case is as unavailing as 1%-

edge of the other's; and since his only chance of winning work in the other; every player knows in ad-

anything is to accept it, he must accept whatever the other

has offered. Thus "second move" loses if the first mover

vance that all moves and tactics are foredoomed

knows that the other is waiting. We now have a game that to neutralization by the symmetrical ~otentiali-

can be characterized as follows: the players dally around ties available to his opponent. The interesting

for 23 hours 58 minutes and then play a game lasting one

minute, this game allowing each player one and only one elements that we might inject in the bargaining

offer which he can make a t any time during the minute. This game are meaningless if perfect symmetry, and

game offers, in effect, three strategies to a player, namely, its acceptance as inevitable by both players, are

( I ) assume the other will wait, and demand 99 per cent;

( 2 ) assume both will make simultaneous offers, and demand

imposed on the game by its definition.

whatever is indicated by the tacit game; (3) wait. ~f both What should we add to the game to enrich it

wait, the game is still to be played. If there is a finite num- if the assumption of symmetry is dropped?

ber of potential waits, we have strategies of wait-once-then-

demand-99-per-cent, wait-once-then-demand-tacit-solution; There are many moves that are often available,

wait-twice-demand-99-per-cent, wait-twice-demand-tacit-SO- but not necessarily identically available to both

lution; etc. This game (the "tacit supergame" consisting of

all strategies for playing the one-minute game) is then the

game

players, in actual situations. Moves would

game; and it has, if we wish to accept it, its own "solution include commitments, threats, promises; tam-

in the strict sense" which consists of all strategies (all lengths pering with the communication system; invoca-

of waits) that end in demands that correspond to the s o h - tion of penalties on promises, commitments, and

tion of the tacit game. (For the definition of a solution in

the strict sense in a tacit two-person game, see Lute and threats; conveyance true

Raiffa, 106ff.) identification; and the injection of contextual

2 18 T H E REVIEW O F ECONOMICS AND STATISTICS

detail that may constrain expectations, particu- symmetry as an interesting possibility, but not

larly when communication is incomplete.ll as a foregone conclusion; stalemate and the

To illustrate, suppose in the earlier coopera- anticipation of it become interesting possibilities

tive game there is a turnstile that permits a if the actions and information structure are in

player to leave but not to return; his current fact conducive to ties. But with non-symmetry

offer as he goes through the turnstile remains as our philosophy, we need not be obsessed with

on the books until the bell rings. Now we have the possibility of ties.

a means by which a player can make a "final" Again, if one player can make an offer and

offer, a "commitment"; whoever can record an destroy communication, he may thereby win

offer favorable to himself and known to the the ensuing tacit game by having provided the

other, and leave the room, has the winning only extant offer that both players can converge

tactic. Of course it may win for either of them; on when they badly need to concert their choices

but this may mean that we end up with something later during the final tacit stage. T o be sure, we

like a foot race, and the one closest to the turn- can consider what happens when identical ca-

stile wins. By analyzing the tactic, and its in- pacities for destruction of communication are

stitutional or physical arrangements, we may present, and both players must recognize that

determine who can make first use of it. they may simultaneously destroy communica-

We have not, it should be noted, converted tion without getting messages across; but this

the game of strategy into a game of skill by interesting symmetrical case seems to be better

letting them race for the turnstile. I t remains considered a special one, not the general case.

true that one wins when he gets to the turnstile I n summary, the perfectly move-symmetrical

first only through the other's cooperation, only bargaining game is not a fruitful general case,

by constraining the other player's choice of but a limiting case that may degenerate into an

strategy. He does not win legally or physically ordinary tacit game. The cooperative game is

by going through the turnstile; he wins strate- rich and meaningful when "moves" are admit-

gically. He makes the other player choose in his ted; and much of the significance of the moves

favor. I t is a tactic in a game of strategy, even will vanish if complete symmetry in their avail-

though the use of it may depend on skill or ability to the players is stamped into the defini-

locational advantage. tion of the game. It is the moves that are in-

We can even put a certain kind of symmetry teresting, not the game without moves; and it is

into the game now, without destroying it; we the potential asymmetry of the moves that makes

can flip a coin to see who is nearest the turnstile them most interesting.

when the game begins, or let the players be

similarly located and of similar speed but with

random elements determining who gets to the

turnstile first. Though the game is now non- Symmetry is not only commonly imposed on

discriminatory, the outcome would still be asym- the move structure of games but adduced as a

metrical, because each player has an incentive plausible characteristic of the solution of the

to run to the turnstile, leaving behind a standing game or of the rational behavior with which the

offer in his own favor .I2 solution must be consistent. Nash's theory of

We can include some risk of a tie, especially the two-person cooperative game explicitly pos-

if there are two turnstiles and the players might tulates symmetry, as does Harsanyi's.13 The

go to them simultaneously. This constitutes symmetry postulate is certainly expedient; it

often permits one to find a solution to a game

"For an extensive analysis of several such moves, see the and to stay - if he wishes -within the realm

author's "Strategy of Conflict: Prospectus for a Reorienta-

tion of Game Theory," Journal of Conflict Resolution, 11 of mathematics. There are few similarly potent

(September 1958).

I2It could be argued a t this point that the expected value " I t is not always clear whether symmetrical behavior, as

of the game is still symmetrically divided between the play- prescribed for example in the earlier quotation from Har-

ers, and that the analyst may consequently still view the sanyi, is to be considered a rule of the game under analysis

game as symmetrical in terms of average outcomes. But if or a behavior postulate separate from the definition of the

he does he commits himself to a minimum of insight into the game; but for the purpose of the present argument it does

game and the way the game will be played. not matter.

FOR T H E ABANDONMENT O F SYMMETRY I N GAME THEORY

concepts that compete with it as bases for solv- Now this intuitive formulation involves two

ing a game. But the justification for the sym- postulates. First, that one bargainer will not

metry postulate has not been just that it leads concede more than he would expect to get if he

to nice results; it has been justified on grounds himself were in the other position. second, that

that the contradiction of symmetry would tend the only basis for his expectation of what he

to contradict the rationdity of the two players. would concede if he were in the other position

This is the underpinning that I want to attack. is his perception of symmetry.

What I am going to argue is that though sym- The intuitive formulation, or even a careful

metry is consistent with the rationality of the formulation in psychological terms, of what it is

players, it can not be demonstrated that asym- that a rational player expects in relation to an-

metry is inconsistent with their rationality, other rational player, poses a problem in sheer

while the inclusion of symmetry in the definition scientific description. Both players, being ra-

of rationality begs the question. I then want to tional, must recognize that the only kind of

offer what I think is an argument in favor of "rational" expectation they can have is a fully

symmetrical solutions, an argument that tends shared expectation of an outcome. I t is prob-

to make symmetry but one of many potential ably not quite accurate -as a description of

influences on the "rational outcome" with no the psychological phenomenon - to say that

prima facie claim to pre-eminence. one expects the second to concede something or

Explicit statements of the relation between to accept something; the second's readiness to

symmetry and rationality have been given by concede or to accept is only an expression of

Harsanyi. He says, "The bargaining problem what he expects the first to accept or to concede,

has an obvious determinate solution in a t least which in turn is what he expects the first to

one special case: viz., in situations that are expect the second to expect the first to expect,

completely symmetric with respect to the two and so on. T o avoid an "ad infinitum" in the

bargaining parties. I n this case it is natural to descriptive process, we have to say that both

assume that the two parties will tend to share sense a shared expectation of an outcome; one's

the net gain equally since neither would be pre- expectation is a-belief that both identify the

pared to grant the other better terms than the same outcome as being indicated by the situa-

latter would grant him."14 I n a later paper he tion, hence as virtually inevitable. Both play-

refers to the symmetry axiom as the "funda- ers, in effect, accept a common authority - the

mental postulate" and says, "Intuitively the as- power of the game to dictate its own solution

sumption underlying this axiom is that ; rational through their intellectual capacity to perceive

bargainer will not expect a rational opponent to it -and what they expect is that they both

grant him larger concessions than he would perceive the same solution.16

make himself under similar conditions." l5

Foundation Discussion Paper No. 46, December 11, 1957,

"Harsanyi, op. cit., 147. He goes on to say, "For in- quoted by permission of the author.)

stance, everybody will expect that two duopolists with the lU Viewed in this way, the intellectual process of arriving

same cost functions, size, market conditions, capital resources, at "rational expectations" in the full-communication bar-

personalities, etc., will reach an agreement giving equal prof- gaining game is virtually identical with the intellectual proc-

its to each of them." ess of arriving at a coordinated choice in the tacit game.

"The full quotation deserves to be given: "What the The actual solutions might be different because the game con-

Zeuthen-Nash theory of bargaining essentially proposes to texts might be different, with different suggestive details;

do is to specify what are the expectations that two rational but the nature of the two solutions seems virtually identical

bargainers can consistently entertain as to each other's bar- since both depend on an agreement that is reached by tacit

gaining strategies if they know each other's utility functions. consent. This is true because the explicit agreement that is

The fundamental postulate of the theory is a symmetry reached in the full-communication game corresponds to a

axiom, which states that the 'functions defining the two par- priori expectations that were reached (or in theory could have

ties' optimal strategies in terms of the data (or, equivalently, been reached) jointly but independently by the two players

the functions defining the two parties' final payoffs) have before the bargaining started. And it is a tacit agreement in

the same mathematical form, except that, of course, the the sense that both can hold confident rational expectations

variables associated with the two parties have to be inter- only if both are aware that both accept the indicated solu-

changed. Intuitively the assumption underlying this axiom tion in advance as the outcome that they both know they

is that a rational bargainer will not expect a rational op- both expect.

ponent to grant him larger concessions than he would make There is a qualification to this point. With full informa-

himself under similar conditions." (Harsanyi, 'IBargaining tion about each other's value systems and a homogeneous

in Ignorance of the Opponent's Utility Function," Cowles set of gains to be divided, there may be an infinity of equiv-

220 T H E REVIEW O F ECONOMICS AND STATISTICS

I n these terms the first (explicit) part of the part of the definition of rationality; to do so

Harsanyi hypothesis might be rephrased: that would destroy the empirical relevance of the

there is, in any bargaining-game situation (with theory and simply make symmetry an independ-

perfect information about utilities), a particular ent axiom. We must have a plausible definition

outcome such that a rational player on either of rationality that does not mention symmetry,

side can recognize that any rational player on and show that asymmetry in the bargaining

either side would recognize it as the indicated expectations would be inconsistent with that

solution. The second (implicit) part of the definition. For our present purpose we must

hypothesis is that the particular outcome so suppose that two players have picked $80 and

recognized is determined by mathematical sym- $20 by agreement, and see whether we can iden-

metry. The first we might call the "rational- tify any kind of intellectual error, misguided

solution postulate"; it is the second that con- expectations, or disorderly self-interest, on the

stitutes the "symmetry postulate." part of one or both of them, in their failure to

The question now is whether the symmetry pick a symmetrical point.

postulate is derived from the players' rationality Specifically, where is the "error" in B's con-

- the rationality of their expectations -or cession of $80 to A? He expected -he may

must rest on other grounds. Additionally, if it tell us, and suppose that we have means to check

rests on other grounds, what are they and how his veracity ( a modest supposition if full in-

firm is the support? formation of utilities is already assumed!) -

T o pursue the first question, whether sym- that A would "demand" $80; he expected A to

metry can be deduced from the rationality of expect to get $80; he knew that A knew that he,

the players' expectations, we can consider the B, expected to yield $80 and be content with

rationality of the two players jointly, and in- $20; he knew that A knew that he knew this;

quire whether a jointly expected non-symmetri- and so on. A expected to get $80, knew that B

cal outcome contradicts the rationality postu- was psychologically ready because he, B , knew

late. If two players confidently believe they that A confidently expected B to be ready, and

share, and do share, the expectation of a par- so on. That is, they both knew-they tell us-

ticular outcome, and that outcome is not sym- and both knew that both knew, that the outcome

metrical in a mathematical sense, can we dem- would ineluctably be $80 for A and $ 2 0 for B.

onstrate that their expectations are irrational, Both were correct in every expectation; the

hence that the rationality postulate is contra- expectations of each were internally consistent

dicted? Specifically, suppose that two players and consistent with the other's. We may be

may have $roo to divide as soon as they agree mystified about how they reached such expecta-

explicitly on how to divide it; and they quite tions; but the feat claims admiration as much

readily agree that A shall have $80 and B shall as contempt. The rational-solution postulate is

have $20; and we know that dollar amounts in beautifully borne out; the game seems to have

this particular case are proportionate to utilities, dictated a particular outcome that both players

and the players do too: can we demonstrate confidently perceived. If, a t this point, we feel

that the players have been irrational? we ourselves wouldn't have perceived the same

We must be careful not to make symmetry outcome, we can conclude that one of four hy-

alent solutions, all yielding the same values to the two players,

potheses is false: ( I ) the rational-solution pos-

but no difficulty in agreeing on an arbitrary choice among tulate, (2) the rationality of A and B, ( 3 ) our

this indifferent set. But tacit bargaining often requires a own rationality, (4) the identity (in all essential

further degree of coordination, namely, a coordinated choice respects) of the game that we introspectively

even among equivalent divisions of the gains. Negotiation

over a boundary line in homogeneous territory is thus dif- play with the game that A and B have just

ferent from the simultaneous dispatch of troops to take up played. But we cannot, on the evidence, declare

positions representing claims; such claims may overlap and

cause trouble even though the terrain values claimed are

the second to be the false one - the rationality

consistent. Thus the coordination ~ r o b l e mis different: and of A and B.

there is no a priori assurance that'the solution to the'tacit Note that if B had insisted on $50, or if A

game (or to games with somewhat incomplete communica-

tion, information, etc.) would be in the set of equivalent

had been content to demand $50, claiming to be

solutions to the fully explicit game. rational and arguing in terms of confidence in

FOR T H E ABANDONMENT OF SYMMETRY I N GAME THEORY 221

a shared expectation of that outcome, both coordinating device that presents itself to them.

players would have been in "error"; and we They must, consciously or unconsciously, use a

cannot tell, on the evidence, which one is irra- selection procedure that leads to unique results.

tional or whether they both are. Unless we There must be something about the point they

make symmetry the definition of rationality we pick that distinguishes it - if not in their con-

can only conclude that a t least one of the play- scious reasoning, at least in our conscious analy-

ers is irrational or that the rational-solution sis - from the continuum of all possible alter-

postulate does not hold. What we have is at best natives.

a single necessary condition for the rationality Now, is it possible for two rational players,

of both players jointly; we have no sufficient through anything other than sheer coincidence

condition, and no necessary condition that can or magic, to focus their attention on the same

be applied to a single player. particular outcome and each rationally be con-

Nor can we catch them up if we ask them fident that the other is focussed on the same

how they arrived a t their expectations. Any outcome with the same appreciation that it is

grounds that are consistent would do, since any mutually expected? And, if so, how can they?

grounds that each expects the other confidently The answer is that they can; this was dem-

to adopt are grounds that he cannot rationally onstrated by the fact that in a sample of over

eschew. Consistent stories are all they need; 40 people, instructed to concert tacitly on pick-

and if they say that a sign on the blackboard ing the same positive number from among the

said A-$80, B-$20, or that they saw in a bulle- infinity of positive numbers, 40 per cent picked

tin that two other players, named A' and B', the same number; and that, instructed to con-

split $80-$20, and that they confidently per- cert tacitly on picking a single cell from a 3 X 3

ceived that this was clear indication to both of matrix or a 4 X 4 matrix, a substantial majority

them of what to expect-that this was the only managed to do so in spite of sizable odds against

"expectable" outcome -we cannot catch them them in a random sense. How can they? By

in error and prove them irrational. They may using any means that is available: any clue,

be irrational but the evidence will not show it. any suggestion, any rule of elimination, that

There is, however, a basis for denying my leads to an unambiguous choice or a high prob-

present argument. Since I have not actually ability of concerted choice. And one of these

applied an independent test of rationality to rules, or clues, or suggestions, is mathematical

two players, given them the game to play, and symmetry.17

observed the 80-20 split, but have only posed I n a game that has absolutely no details but

it as a possibility to see whether it would imply its mathematical structure, in which no inad-

irrationality if it occurred, one could raise the vertent contextual matter can make itself ap-

objection that it could not occur. The argument preciated by a player as something that the

would rest on the problem of coordination; it other can appreciate too, there may be nothing

would run as follows. to work on but a continuum of numbers. And

If two players jointly expect a priori the same all the numbers can be sorted according to

outcome, and confidently recognize it as their 17The basic intellectual premise, or working hypothesis,

common expectation, they must have the intel- for rational players in this game seems to be the premise that

lectual capacity to pick a particular point in some rule must be used if success is to exceed coincidence,

and that the best rule to be found, whatever its rationaliza-

common. If the whole $100 can be divided to tion, is consequently a rational rule. This premise would

the nearest penny, there are 9,999 relevant divi- support, for example, Nash's model that views an "un-

smoothed" tacit game as the limit of a "smoothed" game as

sions to consider, one of which would have to be the smoothing approaches zero. While this view of the un-

picked simultaneously but separately by both smoothed game is in no sense logically necessary it is a

players as their expectation of the outcome. But powerfully suggestive one that can, in the absence of any

better rationale for converging on a single point, command

how can two people concert their selections of the attention of players in need of a common choice. The

one item out of 9,999, in the sense that their limiting process provides a clue for picking one of the in-

expectations focus or converge on it, except with finitely many equilibrium points that actually exist in the

unsmoothed game. Of course, the premise equally supports

odds of 9,999 to I against them? The answer any other procedure that produces a candidate for election

must be that they utilize some trick, or clue, or among the infinitely many potential choices.

222 T H E REVIEW OF ECONOMICS AND STATISTICS

whether they correspond to symmetrical or expectations. (These other aspects are com-

asymmetrical divisions. If all numbers but one monly not contained in the mathematical struc-

represent an asymmetrical split, then sheer ture of the game but are part of the topical

mathematical symmetry is a sufficient rule and content; i.e., they usually depend on the "label-

a supremely helpful one in concerting on a com- ling" of players and strategies, to use the term

mon choice. And it may be possible to set up a of Luce and Raiffa.)

game in such sanitary fashion, with suppression I have no basis for arguing with what force,

of identity of players and of all contextual de- or in what percentage of interesting games,

tail, that there is literally no other visible basis mathematical symmetry does dominate "ration-

for concerting unless impurities creep in.'' al expectations." But I think that the status of

In other words, mathematical symmetry may the symmetry postulate is qualitatively changed

focus the expectations of two rational players by the admission that symmetry has competitors

because it does - granted the other assumed in the role of focussing expectations. For if it

features of the game, like full information on were believed that rational players' expectations

each other's utility systems-provide one means could be brought into consistency only by some

of concerting expectations. Whether it is a po- mathematical property of the payoff function,

tent means may depend on what alternatives are then symmetry might seem to have undisputed

available. claim, particularly if it is possible to find a

That there are other means of concerting, in- unique definition of symmetry that meets cer-

cluding some that may substantially outweigh tain attractive axioms. But if one has to admit

the notion of symmetry, seems amply demon- that other things - things not necessarily part

strated by some of the experiments already of the mathematical structure of the payoff func-

referred to.19 So it is demonstrably possible to tion - can do what symmetry does, then there

set up games in which mathematical symmetry is no a priori reason to suppose that what sym-

does provide the focus for coordinated expecta- metry does is 99 per cent or I per cent of the

tion, and demonstrably possible to set up games job. The appeal of symmetry is no longer mathe-

in which some other aspect of the game focusses matical, it is introspective; and further argu-

''In this view, the theory of Nash (leading to the maxi- ment is limited to the personal appeal of par-

mum-utility-product solution) is a response to the fact that ticular focussing devices to the game theorist

even in the realm of mathematics there are offhand too many as game player, or else to empirical observation.

types of uniqueness or symmetry to provide an unambiguous

rule for selection, hence a need to adduce plausible criteria Thus a normative theory of games, a theory

(axioms) sufficient to yield an unambiguous selection. of strategy, depending on intellectual coordina-

Braithwaite's theory can be characterized the same way. The tion, has a component that is inherently empiri-

fact that the two solutions conflict implies that mathemati-

cians may not have a sufficiently common mathematical cal; it depends on how people can coordinate

aesthetic to satisfy the first part of the Harsanyi postulate, their expectations. I t depends therefore on skill

i.e., to coordinate their expectations on the same outcome.

(R. B. Braithwaite, Theory of Games as a Tool for the Moral and on context. The rational player must ad-

Philosopher, Cambridge, England, 1955; Braithwaite's solu- dress himself to the empirical question of how,

tion is described in Luce and Raiffa, Games and Decisions, in the particular context of his own game, two

145ff.) Braithwaite's construction of the problem as a one-

person arbitration problem, and Luce and Raiffa's reformu- rational players might achieve tacit coordina-

lation of Nash's theory in terms of arbitration rather than tion of choices, if he is to find in the game a

strategy (pages 121-154), seem to emphasize that intellectual basis for sharing an a priori expectation of the

coordination is at the heart of the theory. A legalistic solu-

tion requires some rationalization of a unique outcome; pure outcome with his partner. The identification

casuistry is helpful if the alternative is vacuum. of symmetry with rationality rests on the as-

In For a report and analysis of some of the experiments,

see the author's "Bargaining, Communication, and Limited

sumption that there are certain intellectual

War," Jozcrnal of Conflict Resolution, I (March 1957), 19- processes that rational players are incapable of,

36. Regarding the formal extension of game theory to cover namely, concerting choices on the basis of any-

this type of problem, see the author's "The Strategy of

Conflict: Prospectus for a Reorientation of Game Theory," thing other than mathematical symmetry, and

op. cit., esp. 204-19. Some further elaboration is in the that rational players should know this. I t is a n

author's RAND Corporation paper, P-1385, "Re-interpreta- empirical question whether rational players can

tion of the Solution Concept for the 'Non-Cooperative'

Game" (Santa Monica, 1958). actually do what such a theory denies they can

FOR T H E ABANDONMENT O F SYMMETRY I N GAME THEORY 223

do and should consequently ignore the strategic explicit bargaining game. And imagine a game's

principles produced by such a theory.20 potential payoffs as consisting of all the points

on or within some boundary in the upper-right

I11 quadrant. We now consider some variants of

this game.

An game>which be sub- First, we are to play the same game in tacit

mitted to experiment, may illustrate the point.

form; each of us picks a point along his own

Let us -whether or not we are strongly at-

axis, and if the resulting point is on or within

tracted to the 'ymmetry postulate) and whether

the boundary, we get the amounts (utilities)

or not we are especially attracted to the particu-

denoted by the coordinates we pick. I conjec-

lar symmetry the Nash -put Our- ture that, in the frame of mind I have asked for,

selves in a frame of mind congenial to accepting

we should probably pick the Nash point. With-

the "Nash point" as the rational outcome of an

out asking precisely why, let us go on to the next

m is interesting that in demanding a symmetrical solu- variant. This game is tacit too, but it differs in

tion to an ostensibly symmetrical tacit (non-cooperative) that We get nothing unless the point whose co-

game, Luce and Raiffa dismiss the two most promising can- ordinates we pick is exactly on the boundary.

didates. They consider (Games and Decisions, 90-94) a

matrix, We get nothing unless we exhaust the available

gains. Caution gets us nowhere; each must

choose exactly as the other expects him to.

Again I propose that, in our present frame of

mind, we ought to take the Nash point.

Finally consider another variant: we are

a2

shown the diagram of the game that has just

been played and told that we are now to be

perfect partners, winning and losing together.

and note that it has pure-strategy equilibrium points in the COnSCiouSof the fact that our present game is

upper-left and lower-right corners. These are ruled out on

grounds that LLwhateverrationalization I give for either a1 On a bargaining game we are to pick)

or an there is, by the symmetry of the situation, a similar without communicating, coordinates of a point

rationalization for player 2 , and so it seems inevitable that that lies exactly on the boundary; if we do, we

we both lose." They then look at a pair of maximin strate-

gies, which are unsatisfactory because they do not produce both win prizes - the same prizes no matter

an equilibrium point, and a minimax strategy which they what point we succeed in picking together -

find even inferior. But the important question is whether and if we fail to pick a point on the boundary

players who are both rational and imaginative are quite as

impotent as Luce and Raiffa insist. Can players correlate We get In this pure game,

strategies without communicating? This is an empirical 1 conjecture again that we should (would) in

question. (The writer's experiments, mentioned above, dem- present frame of mind pick the ~~~h point.

onstrate that, at least sometimes, they can.) Offhand it may

seem hard for them to concert on a non-symmetrical pair of because we need ration-

strategies. But much the hardest part is just recognizing alization that leads to a unique point; and in

that they have to ; the question of how to do it then becomes the ,,,text, the bargaining analogy provides it.

a practical matter. They must jointly and tacitly find a clue

to the concerting of their choice. Of course, a non-symmetri- Unless there is a sharp corner (which is then

cal solution in the above matrix is a discriminatory one; it likely to be the Nash point anyway) ; or a sim-

quite arbitrarily condemns one of the players to a smaller ple mid-point as when the boundary is a straight

gain that the other for reasons that may seem purely acci-

dental or incidental. But we have to suppose that a rational line or circular arc (which again coincides with

player can discipline himself to accept the lesser share if the the Nash point) ; or some especially suggestive

clue points that way. Only a discriminatory clue can point form that seems to point towards a particular

to a concerted choice; to deny the discrimination is to deny

the premise that a clue can be .jointly. found and jointly point; or unless there is an impurity (such as

acted on in the interest of an outcome that is jointly fir a dot on the boundary, from a printer's error,

superior to any symmetrical outcome. Luce and Raiffa con-

clude their discussion of this particular game with the remark

or a single point whose coordinates are whole

that "although this seemingly innocuous game possesses some numbers, etc.), we may be led to search for a

symmetries it is difficult to see how to exploit them." But "uniqueJ' definition of symmetry to fall back on,

the real key to this seemingly innocuous game is that it may,

particularly when presented in a context, possess some asym- Nash-type symmetry being as plausible as any

metries, and the object is to exploit them. I can think of, not as simple as some (like the

224 T H E REVIEW OF ECONOMICS AND STATISTICS

intersection of a 45-degree line with the origin demanding tacit bounded-area variant of the

and others of that ilk) but less ambiguous on game; and that in turn takes the heart out of

its own level of sophistication. any player in the explicit bargaining game who

And if the Nash point appeals to us power- might hope that expectations could focus any-

fully in the bargaining game, it must do so be- where else.

cause we are confident that it appeals equally I n other words, by postulating the need for

to our partner who in turn we believe to be coordination of expectations we seem to have

aware that our views coincide; it must therefore an empirical reference for something like the

appeal to us in the pure-coordination game as a Nash axioms. What a theory like Nash's needs

unique point that the partner will consider to be is the premise that a solution exists; it is the

obviously obvious. observable phenomenon of tacit coordination

What does this prove or suggest? I am not that provides empirical evidence that (some-

arguing for the Nash point. I am arguing rather times) rational expectations can be tacitly fo-

that the appeal of the Nash point to a game cussed on a unique (and perhaps efficient) out-

theorist (as introspective game player) may be come, and that leads one to suppose that the

the reverse of the sequence I have just run same may be possible in a game that provides

through. I t may be the focal quality of the nothing but mathematical properties to work on.

Nash-point in the pure coordination game - The Nash theory is vindication of this supposi-

the unequivocal usefulness of a uniquely defined tion -complete vindication if it dominates all

symmetry concept, when no non-mat.hematica1 competing mathematical solutions in terms of

impurities are available to help - that makes mathematical aesthetics. The resulting focal

it a controlling influence in the tacit and terribly point is limited to the universe of mathematics,

cooperative boundary-line variant of the game; however, which should not be equated with the

that in turn makes it a reliable guide in the less universe of game theory.

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- Page 1 of 2 -

For the Abandonment of Symmetry in Game Theory

T. C. Schelling

The Review of Economics and Statistics, Vol. 41, No. 3. (Aug., 1959), pp. 213-224.

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[Footnotes]

1

The Bargaining Problem

John F. Nash, Jr.

Econometrica, Vol. 18, No. 2. (Apr., 1950), pp. 155-162.

Stable URL:

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1

Two-Person Cooperative Games

John Nash

Econometrica, Vol. 21, No. 1. (Jan., 1953), pp. 128-140.

Stable URL:

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1

Approaches to the Bargaining Problem Before and After the Theory of Games: A Critical

Discussion of Zeuthen's, Hicks', and Nash's Theories

John C. Harsanyi

Econometrica, Vol. 24, No. 2. (Apr., 1956), pp. 144-157.

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7

Rejoinder on the Bargaining Problem

Harvey M. Wagner

Southern Economic Journal, Vol. 24, No. 4. (Apr., 1958), pp. 476-482.

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- Page 2 of 2 -

14

Approaches to the Bargaining Problem Before and After the Theory of Games: A Critical

Discussion of Zeuthen's, Hicks', and Nash's Theories

John C. Harsanyi

Econometrica, Vol. 24, No. 2. (Apr., 1956), pp. 144-157.

Stable URL:

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