How Is Game Theory Applicable in Cooperatives?


Vincent White

Game theory is a mathematical approach that studies the strategic interaction between different individuals or groups. It has proven to be a useful tool in various fields, including economics, political science, and psychology. However, it is often overlooked how game theory can be applicable in cooperatives.

Cooperatives are organizations owned and operated by their members, who share common goals and interests. They operate under the principles of cooperation, self-help, and mutual aid.

The success of cooperatives depends on the cooperation and trust among its members. This is where game theory comes into play.

One of the most popular concepts in game theory is the Prisoner’s Dilemma. In this scenario, two criminals are arrested for a crime they committed together. They are held in separate cells with no means of communication.

The prosecutor offers them both a deal: if one confesses and implicates the other, they will receive a lighter sentence while their accomplice will receive a harsher one. If both remain silent, they will both receive moderate sentences. If both confess, they will both receive harsh sentences.

The Prisoner’s Dilemma can be applied to cooperative situations as well. For example, let’s say two farmers share a common irrigation system for their crops.

If each farmer uses too much water, it can lead to depletion of the resource and damage to their crops. However, if one farmer reduces their water usage while the other does not, they will experience greater crop yields while their neighbor suffers losses.

This situation can be modeled as a Prisoner’s Dilemma game. If both farmers cooperate by using an equal amount of water that benefits them both in terms of crop yield as well as resource conservation; then it would result in mutual benefit for all involved individuals.

Another application of game theory in cooperatives is through bargaining games. In these scenarios, two parties negotiate over some issue such as pricing or distribution of resources.

For instance – a group of farmers can bargain with a local market to sell their crops. If the market owner offers a low price, the farmers may choose to sell their produce elsewhere. However, if the market owner offers a fair price, the farmers may choose to sell exclusively to that market.

This situation can be modeled as a bargaining game in which both parties have an interest in reaching an agreement that is mutually beneficial. Game theory provides tools for analyzing such games and finding optimal strategies for both parties.

In conclusion, Game theory proves to be an essential tool in analyzing cooperative situations by providing insights into how individuals behave in different scenarios. It helps cooperative members understand each other’s motives and strategies, leading to better decision-making and cooperation. By using game theory principles, cooperatives can foster trust among its members and achieve mutual benefits for all involved individuals.