Inducing Cooperation by Self-Stipulated Penalties
AbstractThis paper considers an approach for inducing cooperation in prisoner¡¯s dilemma. The approach is based on players individually committing to pay self-stipulated penalties for defection. We provide a complete characterization of self-stipulated penalties that are necessary and sufficient to induce the players to cooperate in subgame-perfect equilibrium. An alternative interpretation of the conditions using contract remedies is provided.
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Bibliographic InfoArticle provided by Society for AEF in its journal Annals of Economics and Finance.
Volume (Year): 9 (2008)
Issue (Month): 2 (November)
Penalty for defection; Prisoner¡¯s dilemma; Subgame-perfect equilibrium.;
Find related papers by JEL classification:
- C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
- K12 - Law and Economics - - Basic Areas of Law - - - Contract Law
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- Wilkie, Simon & Jackson, Matthew O., 2002.
"Endogenous Games and Mechanisms: Side Payments Among Players,"
1150, California Institute of Technology, Division of the Humanities and Social Sciences.
- Matthew O. Jackson & Simon Wilkie, 2005. "Endogenous Games and Mechanisms: Side Payments Among Players," Review of Economic Studies, Oxford University Press, vol. 72(2), pages 543-566.
- Matthew O. Jackson & Simon Wilkie, 2002. "Endogenous Games and Mechanisms: Side Payments Among Players," Microeconomics 0211008, EconWPA.
- Williamson, Oliver E, 1983. "Credible Commitments: Using Hostages to Support Exchange," American Economic Review, American Economic Association, vol. 73(4), pages 519-40, September.
- Jianpei Li & Paul Schweinzer, 2013. "Efficiency in strategic form games: A little trust can go a long way," Discussion Papers 13/19, Department of Economics, University of York.
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