Testing Nash’s Solution of the Cooperative Game

Typically, the outcomes of a two-person non-constantsum game can be partitioned into two classes — Pareto-optimal and non-Pareto-optimal. The former jointly dominate the latter in the sense that both players prefer any Pareto-optimal outcome to any non-Pareto-optimal one. However, in order to achieve a Pareto-optimal outcome, the strategy choices of the two players must, in general, be coordinated. Moreover, a Pareto-optimal outcome may not be an equilibrium; so that it may be in the interest of each player to ‘move away’ from it, even though if both move away, both may suffer an impairment of payoffs.