Cooperative Decision-Making Under Risk

In co-operative games, one generally assumes that the agents know exactly the joint (monetary) gains that can be achieved by any possible coalition of co-operating agents. In reality, however, only little is known with certainty. This does not necessarily imply that traditional co-operative game theory cannot be applied in practical situations, for in various cases knowledge of the expected gains suffices. In many other cases, however, it is just the sharing of risk that is beneficial. Joint ventures, for instance, exist since co-operation reduces the risk of the investment for the individual parties. Since the existing models fail to incorporate such risks, they are not suitable for analyzing co-operative decision-making under risk. This book aims to rectify this deficiency by discussing a model of co-operative games with random payoffs.