Risk-dominant equilibrium in chicken and stag-hunt games with different dilemma strengths

Abstract Theoretical games, as well as many systems of industrial organization and international trade, often have multiple equilibria. The choice of a unique equilibrium is crucial in such cases. We study the risk-dominant equilibrium in chicken and staghunt games and examine the influence of the strength of both risk-averting and gamble-intending dilemmas. Conditions under which the risk-dominant equilibrium is mutual cooperation are derived for both games. It is shown that the risk-dominant equilibrium depends on the strength of both risk-averting and gamble-intending dilemmas. Applications to models of the Iran-Iraq conflict over shared oil and gas resources are given and appropriate solutions are proposed.