The optimal degree of cooperation in the repeated Prisoners' Dilemma with side payments
AbstractIn the infinitely repeated Prisoners' Dilemma with side payments, we characterize the Pareto frontier of the set of subgame perfect equilibrium payoffs for all possible combinations of discount factors. Play paths implementing Pareto dominant equilibrium payoffs are uniquely determined in all but the first period. Full cooperation does not necessarily implement these payoffs even when it maximizes total stage game payoffs. Rather, when the difference in players' discount factors is sufficiently large, Pareto dominant equilibrium payoffs are implemented by partial cooperation supported by repeated payments from the impatient to the patient player. When both players are sufficiently patient, such payoffs, while implemented via full cooperation, are supported by repeated payments from the impatient to the patient player. We characterize conditions under which public randomization has no impact on the Pareto dominant equilibrium payoffs and conditions under which such payoffs are robust to renegotiation.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
Bibliographic InfoArticle provided by Elsevier in its journal Games and Economic Behavior.
Volume (Year): 67 (2009)
Issue (Month): 1 (September)
Contact details of provider:
Web page: http://www.elsevier.com/locate/inca/622836
Repeated Prisoners' Dilemma Side payments Differential time preferences Pareto dominant equilibrium payoffs Renegotiation-proofness;
You can help add them by filling out this form.
CitEc Project, subscribe to its RSS feed for this item.
- Kranz, Sebastian & Ohlendorf, Susanne, 2009. "Renegotiation-Proof Relational Contracts with Side Payments," Discussion Paper Series of SFB/TR 15 Governance and the Efficiency of Economic Systems 259, Free University of Berlin, Humboldt University of Berlin, University of Bonn, University of Mannheim, University of Munich.
- Sebastian Kranz, 2012.
"Discounted Stochastic Games with Voluntary Transfers,"
Levine's Working Paper Archive
786969000000000423, David K. Levine.
- Sebastian Kranz, 2012. "Discounted Stochastic Games with Voluntary Transfers," Cowles Foundation Discussion Papers 1847, Cowles Foundation for Research in Economics, Yale University.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Zhang, Lei).
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.