4 Control Costs

Abstract

In this chapter, games with control costs* are studied. These are normal form games in which each player, in addition to receiving his payoff from the game, incurs costs depending on how well he chooses to control his actions. Such a game models the idea that a player can reduce the probability of making mistakes, but that he can only do so by being extra prudent, hence, by spending an extra effort, which involves some costs.¹ The goal of the chapter is to investigate what the consequences are of viewing an ordinary normal form game as a limiting case of a game with control costs, i.e. it is examined which equilibria are still viable when infinitesimal control costs are incorporated into the analysis of normal form games.²

The idea to study games was raised by R. Selten.