Operational tools and adaptive management

Annex 2 Game Theory – a short introduction with relevance for the
work in this report
Game theory is an analytical tool to systematically analyse strategic actions between agents. It
can be divided into cooperative and non-cooperative game theory. The former is characterised
by the ability to meet binding agreements, i.e. there exist an authority with the power to
enforce the agreement, whereas the latter is characterised by the absence of such a power.
Hence, in non-cooperative game theory all agreements must be self-enforcing, which means
that it must be in the agents own interest to fulfil the agreement. Any agreement between
these agents has to be self-enforcing as none of them has the authority to enforce any
regulation upon the other. Hence, the interactions between the fisheries interests and the
ENGOs and also the one between the EU authorities and the national authorities may most
properly be analysed by non-cooperative game theory. On the other hand, the interactions
between fishers and authorities on different levels can just as well be analysed by the use of
cooperative game theory. However, as the models applied by the two divisions of game
theory vary significantly, we have chosen the non cooperative approach. Another reason for
this is the argument that self-enforcing agreements may be easier to implement, and have a
higher degree of acceptability.
In game theory one takes into consideration that the action of one group affects the preferred
action of other groups, and this affects the preferred (equilibrium) actions of all groups. This
is also denoted strategic actions. The game theoretical analyses within economics aim at
defining the optimal action, also called best reply, to take for one agent (or group of agents)
given the actions of all other agents, and this is done for all agents. This set of mutually
optimal actions are characterised by the fact that if no agent change their action, it is in no
other agent‟s interest to change her/his action, which is the definition of equilibrium. When
there is full information between the agents, this is called Nash equilibrium, and with
asymmetric information it is called Bayesian-Nash equilibrium.
In economic game theory all negotiations and trade-offs between agents are explicitly
modelled. On the one hand this limits the analysis models with regard to how many and which
aspects of human interactions they can handle. On the other hand it makes the models very
concrete and explicit, and the relationship between one specific action taken by one agent to
the reaction of another agent takes the form of a logic (and rational) procedure.
Empirically there are several examples showing that independent actions often result in suboptimal
(Nash) equilibria for transnational public goods and externalities. Hence, to foster
cooperation, the international community has devised institutions (Arce and Sandler 2001).
Sometimes these have evolved as a result of common interest of all actors. They then
typically are stated as standards or conventions. In other respects more or less enforceable
treaties have been met. This is especially the case within environmental and security matters.
Understanding the relationship between the introduction of a regulation, e.g. in the fisheries,
and eventual changes in the fishers‟ behaviour implies an ability to predict the action of
specific stakeholders or groups of agents given a change in the action by another stakeholder
group or group of agents. Economic game theory provides the analytical tools for that end.
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