A self-enforcing agreement is an agreement that is enforced only by the parties to it; no external party can enforce or interfere with the agreement. (In this respect it differs from an enforceable
contract
A contract is an agreement that specifies certain legally enforceable rights and obligations pertaining to two or more parties. A contract typically involves consent to transfer of goods, services, money, or promise to transfer any of thos ...
.) The agreement will stand so long as the parties believe it is mutually beneficial and it is not breached by any party.
''A Theory of Self-Enforcing Agreements'' L.G. Tesler, University of Chicago
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In game theory
Game theory is the study of mathematical models of strategic interactions. It has applications in many fields of social science, and is used extensively in economics, logic, systems science and computer science. Initially, game theory addressed ...
, games in which cooperative behaviour can only be enforced through self-enforcing agreements are called non-cooperative games
In game theory, a non-cooperative game is a game in which there are no external rules or binding agreements that enforce the cooperation of the players. A non-cooperative game is typically used to model a competitive environment. This is stated in ...
, whereas games allowing strategies relying on external enforcement are called cooperative games Cooperative game may refer to:
* Cooperative board game, board games in which players work together to achieve a common goal
* Cooperative game theory, in game theory, a game with competition between groups of players and the possibility of coopera ...
. Nash equilibrium
In game theory, the Nash equilibrium is the most commonly used solution concept for non-cooperative games. A Nash equilibrium is a situation where no player could gain by changing their own strategy (holding all other players' strategies fixed) ...
is the most common kind of self-enforcing agreement.
References
Agreements
Game theory equilibrium concepts
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