Payoff
A number standing for how much a player values an outcome, not the outcome itself.
Often misread asTreating the printed numbers as raw outcomes, then arguing the player would not really pick the highest one because of guilt, spite, fairness or reputation.
How to see it
The number that has already absorbed everything you care about
A payoff is a single number standing for how much a player likes an outcome. It is not money, or points, or years in prison. It is a ranking that has already absorbed everything that player cares about, including how they feel about the other players.
The checkIf a motive would change the choice, it belongs inside the number; the payoff is the preference, not the prize.
Try itTry to rescue cooperation in the prisoner's dilemma by saying the two players are friends. Write the new numbers down. If cooperating is now best for each of them whatever the other does, you have not solved the dilemma, you have written a different game.
Games that show it
- The payoff lens
- Dictator game
- Relative-rank dilemma
Leads on to
- Adverse selection
- Best response
- Coalition
- Condorcet winner
- Cooperative game
- Discounting
- Extensive form
- Externality
- Individual rationality
- Maximin
- Mechanism design
- Minimax
- Moral hazard
- Nash bargaining solution
- Normal form
- Pareto efficiency
- Replicator dynamics
- Risk dominance
- Strategic complements and substitutes
- Strict dominance
- Tragedy of the commons
- Transferable utility
- War of attrition
- Winner's curse
Sources
- von Neumann, J. & Morgenstern, O. (1944). Princeton UP.