The concept of coalition-proof Nash equilibrium applies to certain "noncooperative" environments in which players can freely discuss their strategies but cannot make binding commitments.[1]
It emphasizes the immunization to deviations that are self-enforcing. While the best-response property in Nash equilibrium is necessary for self-enforceability, it is not generally sufficient when players can jointly deviate in a way that is mutually beneficial.
The Strong Nash equilibrium is criticized as too "strong" in that the environment allows for unlimited private communication.[1] In the coalition-proof Nash equilibrium the private communication is limited.[1]
Definition
Informally:
At first all players are in a room deliberating their strategies. Then one by one, they leave the room fixing their strategy and only those left are allowed to change their strategies, both individually and together.
In a single player, single stage game , is a Perfectly Coalition-Proof Nash equilibrium if and only if maximizes .
Let . Assume that a Perfectly Coalition-Proof Nash equilibrium has been defined for all games with players and stages, where , and .
For any game with players and stages, is perfectly self-enforcing if, for all in (set of all coalitions), is a Perfectly Coalition-Proof Nash equilibrium in the game , and if the restriction of to any proper subgame forms a Perfectly Coalition-Proof Nash equilibrium in that subgame.
For any game with players and stages, is a Perfectly Coalition-Proof Nash equilibrium if it is perfectly self-enforcing, and if there does not exist another perfectly self-enforcing strategy vector in such that for all .
The coalition-proof Nash equilibrium refines the Nash equilibrium by adopting a stronger notion of self-enforceability that allows multilateral deviations.
Parallel to the idea of correlated equilibrium as an extension to Nash equilibrium when public signalling device is allowed, coalition-proof equilibrium is defined by Diego Moreno and John Wooders.[2]