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Voluntarily separable repeated Prisonerʼs Dilemma with reference letters

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  • Fujiwara-Greve, Takako
  • Okuno-Fujiwara, Masahiro
  • Suzuki, Nobue

Abstract

We consider the voluntarily separable repeated Prisonerʼs Dilemma model in which players randomly meet and form pairs to repeatedly play Prisonerʼs Dilemma only by mutual agreement. While the literature has dealt with the case of no information flow across partnerships, we consider the case in which players can issue a “reference letter” to verify at least that the partnership entered the cooperation phase. We show that such reference letters can be voluntarily provided by the partners even at some cost, and that the sheer existence of a letter shortens the trust-building periods and thus improves social efficiency.

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Bibliographic Info

Article provided by Elsevier in its journal Games and Economic Behavior.

Volume (Year): 74 (2012)
Issue (Month): 2 ()
Pages: 504-516

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Handle: RePEc:eee:gamebe:v:74:y:2012:i:2:p:504-516

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Web page: http://www.elsevier.com/locate/inca/622836

Related research

Keywords: Voluntary separation; Prisonerʼs Dilemma; Cooperation; Information; Random matching;

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References

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  1. Takako Fujiwara-Greve & Masahiro Okuno-Fujiwara, 2008. "Voluntarily Separable Repeated Prisoner's Dilemma," CIRJE F-Series CIRJE-F-599, CIRJE, Faculty of Economics, University of Tokyo.
  2. Parikshit Ghosh & Debraj Ray, 1995. "Cooperation in Community Interaction Without Information Flows," Boston University - Institute for Economic Development 64, Boston University, Institute for Economic Development.
  3. Ben-Porath, Elchanan & Kahneman, Michael, 2003. "Communication in repeated games with costly monitoring," Games and Economic Behavior, Elsevier, vol. 44(2), pages 227-250, August.
  4. Robert Gibbons & Lawrence Katz, 1989. "Layoffs and Lemons," Working Papers 629, Princeton University, Department of Economics, Industrial Relations Section..
  5. Carmichael, H Lorne & MacLeod, W Bentley, 1997. "Gift Giving and the Evolution of Cooperation," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 38(3), pages 485-509, August.
  6. Glen Ellison, 2010. "Cooperation in the Prisoner's Dilemma with Anonymous Random Matching," Levine's Working Paper Archive 631, David K. Levine.
  7. Okuno-Fujiwara Masahiro & Postlewaite Andrew, 1995. "Social Norms and Random Matching Games," Games and Economic Behavior, Elsevier, vol. 9(1), pages 79-109, April.
  8. Shapiro, Carl & Stiglitz, Joseph E, 1984. "Equilibrium Unemployment as a Worker Discipline Device," American Economic Review, American Economic Association, vol. 74(3), pages 433-44, June.
  9. Kandori, Michihiro, 1992. "The Use of Information in Repeated Games with Imperfect Monitoring," Review of Economic Studies, Wiley Blackwell, vol. 59(3), pages 581-93, July.
  10. "Okuno-Fujiwara, Masahiro" & "Fujiwara-Greve, Takako" & "Suzuki, Nobue", 2007. "Social Norms and Voluntary Cooperation," Economic Review, Hitotsubashi University, vol. 58(2), pages 110-121, April.
  11. Kandori, Michihiro, 1992. "Social Norms and Community Enforcement," Review of Economic Studies, Wiley Blackwell, vol. 59(1), pages 63-80, January.
  12. Kranton, Rachel E, 1996. "The Formation of Cooperative Relationships," Journal of Law, Economics and Organization, Oxford University Press, vol. 12(1), pages 214-33, April.
  13. Miyagawa, Eiichi & Miyahara, Yasuyuki & Sekiguchi, Tadashi, 2008. "The folk theorem for repeated games with observation costs," Journal of Economic Theory, Elsevier, vol. 139(1), pages 192-221, March.
  14. Lazear, Edward P, 1981. "Agency, Earnings Profiles, Productivity, and Hours Restrictions," American Economic Review, American Economic Association, vol. 71(4), pages 606-20, September.
  15. Flesch, János & Perea, Andrés, 2009. "Repeated games with voluntary information purchase," Games and Economic Behavior, Elsevier, vol. 66(1), pages 126-145, May.
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