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"Assurance game" is a general name for the game more commonly known as "Stag Hunt." The French philosopher, Jean Jacques Rousseau, presented the subsequent circumstances. Two hunters can moreover jointly hunt a stag (an adult deer and quite large meal) or individually hunt a rabbit (tasty, but significantly less filling). Hunting stags is quite difficult and need mutual cooperation. If either hunts a stag alone, the chance of victory is negligible. Hunting stags is most advantageous for society but needs a ample of trust amid its members.
Description
There are two pure policy equilibria. Both players favor one equilibrium to the other - it is both Pareto optimal and Hicks optimal. However, the incompetent equilibrium is less risky as the payoff variance over the other player's strategies is lower. Specifically, one equilibrium is payoff-dominant while the other is risk-dominant.
Example
Firm 2
invest
don't
Firm 1
10,10
-50,0
0,-50
0,0
Player 2
L
R
Player 1
U
I,V
II,VI
D
III,VII
IV,VIII
Where the following relations hold: I> III >= IV > II V > VI >= VIII> VII
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