Risk dominance

Risk dominance is an equilibrium selection criterion introduced by John Harsanyi and Reinhard Selten, favoring the equilibrium that is safer to play when a player is uncertain about the opponent's strategy choice. Unlike Pareto dominance, which selects the equilibrium with the highest joint payoff, risk dominance selects the equilibrium that maximizes the product of the players' deviations losses — the equilibrium from which unilateral deviation is most costly. In coordination games, risk-dominant and Pareto-dominant equilibria often conflict, producing a strategic tension between efficiency and security.

Risk dominance has been criticized for lacking axiomatic foundation and for predicting poorly in some experimental settings, yet it remains influential as a formalization of cautious rationality. The criterion's deeper significance lies in what it reveals about bounded rationality: when agents cannot compute or trust others' choices, they default to strategies that minimize worst-case exposure — a logic that extends far beyond games into institutional design and social norm formation.