Program Equilibria and Discounted Computation Time

Abstract

Tennenholtz (GEB 2004) developed Program Equilibrium to model play in a finite two-player game where each player can base their strategy on the other player's strategies. Tennenholtz's model allowed each player to produce a "loop-free" computer program that had access to the code for both players. He showed a folk theorem where any mixed-strategy individually rational play could be an equilibrium payo in this model even in a one-shot game. Kalai et al. gave a general folk theorem for correlated play in a more generic commitment model. We develop a new model of program equilibrium using general computational models and discounting the payos based on the computation time used. We give an even more general folk theorem giving correlated-strategy payoffs down to the pure minimax of each player. We also show equilibrium in other games not covered by the earlier work.brokers, applied mechanism design, linear commission fees, optimal indirect mechanisms, internet auctions, auction houses.