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→When Paretto efficiency is not the equilibrium state - Prisoner's dilemna: I don't know if the last statemet is right. I think it's right, but I'm not sure.
However, the Pareto optimal solution is not the equilibrium solution. For example, in "not confess/confess" ("bad" for A, "very good" for B), A could switch to "confess". The result improves A's result to "OK" while changing B's result also to "OK". However now at "confess/confess", if B changes to "not confess", his result becomes "bad". Thus, "confess/confess" would be the equilibrium outcome.
However, the Pareto optimal solution is not the equilibrium solution. For example, in "not confess/confess" ("bad" for A, "very good" for B), A could switch to "confess". The result improves A's result to "OK" while changing B's result also to "OK". However now at "confess/confess", if B changes to "not confess", his result becomes "bad". Thus, "confess/confess" would be the equilibrium outcome.
Generally in a game with finite steps, the equilibrium outcome may not necessarily be the Paretto efficient outcome. However, in a game with infinite steps, it can be shown that the equilibrium outcome is the Paretto efficient outcome.
Generally in a game with finite steps, the equilibrium outcome may not necessarily be the Paretto efficient outcome.
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