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Prisoners' Other Dilemma

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  • Spagnolo, Giancarlo

    ()
    (S.S.E., University of Mannheim, and CEPR)

  • Blonski, Matthias

    (Dept. of Economics, University of Mannheim)

Abstract

We find that contrary to common perception, cooperation as equilibrium of the infinitely repeated discounted prisoner's dilemma is in many relevant cases not very plausible, or at least questionable: for a significant subset of the payoff-discount factor parameter space cooperation equilibria are strictly risk dominated by non-cooperation (according to the Harsanyi-Selten 1988 criterion). Examples include collusion equilibria in the repeated Cournot duopoly.

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File URL: http://swopec.hhs.se/hastef/papers/hastef0437.pdf
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Bibliographic Info

Paper provided by Stockholm School of Economics in its series Working Paper Series in Economics and Finance with number 437.

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Length: 11 pages
Date of creation: 20 Feb 2001
Date of revision: 20 Feb 2001
Handle: RePEc:hhs:hastef:0437

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Keywords: Prisoner's Dilemma; Risk dominance; Repeated games; Equilibrium selection; Cooperation; Collusion;

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References

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  1. Kandori, Michihiro & Mailath, George J & Rob, Rafael, 1993. "Learning, Mutation, and Long Run Equilibria in Games," Econometrica, Econometric Society, Econometric Society, vol. 61(1), pages 29-56, January.
  2. van Damme,Eric, 1986. "Renegotiation-proof equilibria in repeated Prisoner`s dilemma," Discussion Paper Serie A, University of Bonn, Germany 84, University of Bonn, Germany.
  3. Damme, E.E.C. van & Hurkens, J.P.M., 1999. "Endogenous Stackelberg leadership," Open Access publications from Tilburg University, Tilburg University urn:nbn:nl:ui:12-154410, Tilburg University.
  4. Harsanyi, John C., 1995. "A new theory of equilibrium selection for games with complete information," Games and Economic Behavior, Elsevier, Elsevier, vol. 8(1), pages 91-122.
  5. Carlsson, H. & Damme, E.E.C. van, 1990. "Global games and equilibrium selection," Discussion Paper, Tilburg University, Center for Economic Research 1990-52, Tilburg University, Center for Economic Research.
  6. Damme, E.E.C. van & Hurkens, S., 2004. "Endogenous price leadership," Open Access publications from Tilburg University, Tilburg University urn:nbn:nl:ui:12-129320, Tilburg University.
  7. Ehud Lehrer & Ady Pauzner, 1999. "Repeated Games with Differential Time Preferences," Econometrica, Econometric Society, Econometric Society, vol. 67(2), pages 393-412, March.
  8. John B Van Huyck & Raymond C Battalio & Richard O Beil, 1997. "Tacit coordination games, strategic uncertainty, and coordination failure," Levine's Working Paper Archive 1225, David K. Levine.
  9. Friedman, James W, 1971. "A Non-cooperative Equilibrium for Supergames," Review of Economic Studies, Wiley Blackwell, Wiley Blackwell, vol. 38(113), pages 1-12, January.
  10. John C. Harsanyi & Reinhard Selten, 1988. "A General Theory of Equilibrium Selection in Games," MIT Press Books, The MIT Press, The MIT Press, edition 1, volume 1, number 0262582384, December.
  11. Fudenberg, Drew & Maskin, Eric, 1986. "The Folk Theorem in Repeated Games with Discounting or with Incomplete Information," Econometrica, Econometric Society, Econometric Society, vol. 54(3), pages 533-54, May.
  12. Farrell, Joseph & Maskin, Eric, 1989. "Renegotiation in repeated games," Games and Economic Behavior, Elsevier, Elsevier, vol. 1(4), pages 327-360, December.
  13. Young, H Peyton, 1993. "The Evolution of Conventions," Econometrica, Econometric Society, Econometric Society, vol. 61(1), pages 57-84, January.
  14. Damme, E.E.C. van, 1989. "Renegotiation-proof equilibria in repeated prisoners' dilemma," Open Access publications from Tilburg University, Tilburg University urn:nbn:nl:ui:12-154423, Tilburg University.
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Citations

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Cited by:
  1. Giancarlo Spagnolo, 2004. "Divide et Impera. Optimnal Deterrence Mechanisms Against Cartels and Organized Crime," Econometric Society 2004 North American Winter Meetings, Econometric Society 485, Econometric Society.
  2. Blonski, Matthias & Spagnolo, Giancarlo, 2002. "Relational Contracts and Property Rights," CEPR Discussion Papers, C.E.P.R. Discussion Papers 3460, C.E.P.R. Discussion Papers.
  3. Pedro Dal Bo & Guillaume R. Frochette, 2011. "The Evolution of Cooperation in Infinitely Repeated Games: Experimental Evidence," American Economic Review, American Economic Association, American Economic Association, vol. 101(1), pages 411-29, February.
  4. Matthias Blonski & Peter Ockenfels & Giancarlo Spagnolo, 2011. "Equilibrium Selection in the Repeated Prisoner's Dilemma: Axiomatic Approach and Experimental Evidence," American Economic Journal: Microeconomics, American Economic Association, American Economic Association, vol. 3(3), pages 164-92, August.
  5. Gabriele Camera & Marco Casari & Maria Bigoni, 2010. "Cooperative Strategies in Groups of Strangers: An Experiment," Purdue University Economics Working Papers 1237, Purdue University, Department of Economics.
  6. Bigoni, Maria & Le Coq, ChloƩ & Fridolfsson, Sven-Olof & Spagnolo, Giancarlo, 2008. "Risk Aversion, Prospect Theory, and Strategic Risk in Law Enforcement: Evidence From an Antitrust Experiment," Working Paper Series in Economics and Finance, Stockholm School of Economics 696, Stockholm School of Economics.
  7. Leliefeld, D. & Motchenkova, E., 2007. "To Protect in Order to Serve: Adverse Effects of Leniency Programs in View of Industry Asymmetry," Discussion Paper, Tilburg University, Tilburg Law and Economic Center 2007-007, Tilburg University, Tilburg Law and Economic Center.

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