Classical solution concepts in game theory, such as the Nash equilibrium and the subgame-perfect equilibrium, are based on the assumption that players make their choices on a purely individual basis and that they are not able to coordinate their actions through binding agreements. This sometimes yields counter-intuitive results, such as in the Prisoner's Dilemma. In most real-world situations that are similar to the Prisoner's dilemma, people can negotiate and jointly agree to choose their actions in a way that prevents them from hurting each other. If necessary, with the help of legally binding contracts.
In this talk I will therefore introduce a new game-theoretical solution concept that does take into account the possibility for the players to make binding agreements about their actions. I will use a classical text-book game known as the Centipede Game as an example, and show how this new solution concept prescribes a more satisfactory outcome than the classical subgame-perfect equilibrium. Furthermore, I will present experimental results obtained with a negotiation algorithm based on Monte Carlo Tree Search.