Non-Zero-Sum Game

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A Non-Zero-Sum Game is a non-strictly competitive game in which a game participant's utility change is exactly balanced by the other game participant(s) utility changed.



References

2014

  • (Wikipedia, 2014) ⇒ http://wikipedia.org/wiki/Zero-sum_game#Non-zero-sum Retrieved:2014-12-06.
    • Many economic situations are not zero-sum, since valuable goods and services can be created, destroyed, or badly allocated in a number of ways, and any of these will create a net gain or loss of utility to numerous stakeholders. Specifically, all trade is by definition positive sum, because when two parties agree to an exchange each party must consider the goods it is receiving to be more valuable than the goods it is delivering. In fact, all economic exchanges must benefit both parties to the point that each party can overcome its transaction costs, or the transaction would simply not take place.[citation needed]

      There is some semantic confusion in addressing exchanges under coercion. If we assume that "Trade X", in which Adam trades Good A to Brian for Good B, does not benefit Adam sufficiently, Adam will ignore Trade X (and trade his Good A for something else in a different positive-sum transaction, or keep it). However, if Brian uses force to ensure that Adam will exchange Good A for Good B, then this says nothing about the original Trade X. Trade X was not, and still is not, positive-sum (in fact, this non-occurring transaction may be zero-sum, if Brian's net gain of utility coincidentally offsets Adam's net loss of utility). What has in fact happened is that a new trade has been proposed, "Trade Y", where Adam exchanges Good A for two things: Good B and escaping the punishment imposed by Brian for refusing the trade. Trade Y is positive-sum, because if Adam wanted to refuse the trade, he theoretically has that option (although it is likely now a much worse option), but he has determined that his position is better served in at least temporarily putting up with the coercion. Under coercion, the coerced party is still doing the best they can under their unfortunate circumstances, and any exchanges they make are positive-sum.[citation needed]

      There is additional confusion under asymmetric information. Although many economic theories assume perfect information, economic participants with imperfect or even no information can always avoid making trades that they feel are not in their best interest. Considering transaction costs, then, no zero-sum exchange would ever take place, although asymmetric information can reduce the number of positive-sum exchanges, as occurs in “The Market for Lemons”.