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Foundations for Cooperation in the Prisoners’ Dilemma

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  • Brendan Daley
  • Philipp Sadowski
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    Abstract

    We provide axiomatic foundations for a simple model of play in the prisoners’ dilemma. The model accommodates cooperation and suggests that players behave as if their expectations about their opponents’ behavior vary with their own choice. We refer to this nonstandard updating as magical thinking. The degree to which players exhibit magical thinking may be heterogeneous in the population and is captured by a uniquely identified parameter for each player. Further, it is as if all players perceive these parameters to be i.i.d. draws from a common distribution. The model’s identification allows for tractable comparative statics.

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    Bibliographic Info

    Paper provided by Duke University, Department of Economics in its series Working Papers with number 13-17.

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    Length: 40
    Date of creation: 2013
    Date of revision:
    Handle: RePEc:duk:dukeec:13-17

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    Postal: Department of Economics Duke University 213 Social Sciences Building Box 90097 Durham, NC 27708-0097
    Phone: (919) 660-1800
    Fax: (919) 684-8974
    Web page: http://econ.duke.edu/

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    Keywords: Prisoners’ dilemma; magical thinking; cooperation;

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