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Altruism, Partner Choice, and Fixed-Cost Signaling

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  • Andriy Zapechelnyuk

    ()

  • Ro'i Zultan

    ()

Abstract

We consider a multitype population model with unobservable types, in which players are engaged in the `mutual help' game: each player can increase her partner's fitness at a cost to oneself. All individuals prefer free riding to cooperation, but some of them, helpers, can establish reciprocal cooperation in a long-term relationship. Such heterogeneity can drive cooperation through a partner selection mechanism under which helpers choose to interact with one another and shun non-helpers. However, in contrast to the existing literature, we assume that each individual is matched with an anonymous partner, and therefore, stable cooperation cannot be achieved by partner selection per se. We suggest that helpers can signal their type to one another in order to establish long-term relationships, and we show that a reliable signal always exists. Moreover, due to the difference in future benefits of a long-term relationship for helpers and non-helpers, the signal need not be a handicap, in the sense that the cost of the signal need not be correlated with type.

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Bibliographic Info

Paper provided by The Center for the Study of Rationality, Hebrew University, Jerusalem in its series Discussion Paper Series with number dp483.

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Length: 19 pages
Date of creation: May 2008
Date of revision: Jul 2008
Handle: RePEc:huj:dispap:dp483

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  1. Eric Alden Smith & Samuel Bowles & Herbert Gintis, 2000. "Costly Signaling and Cooperation," Working Papers 00-12-071, Santa Fe Institute.
  2. Rubinstein, Ariel, 1979. "Equilibrium in supergames with the overtaking criterion," Journal of Economic Theory, Elsevier, vol. 21(1), pages 1-9, August.
  3. David Austen-Smith & Jeffrey S. Banks, 1998. "Cheap Talk and Burned Money," Discussion Papers 1245, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
  4. Hirshlifer, David & Rassmusen, Eric, 1989. "Cooperation in a repeated prisoners' dilemma with ostracism," Journal of Economic Behavior & Organization, Elsevier, vol. 12(1), pages 87-106, August.
  5. Paul R. Milgrom & John Roberts, 1984. "Price and Advertising Signals of Product Quality," Cowles Foundation Discussion Papers 709, Cowles Foundation for Research in Economics, Yale University.
  6. Robert J. Aumann & Lloyd S. Shapley, 1992. "Long Term Competition-A Game Theoretic Analysis," UCLA Economics Working Papers 676, UCLA Department of Economics.
  7. Friedman, James W, 1971. "A Non-cooperative Equilibrium for Supergames," Review of Economic Studies, Wiley Blackwell, vol. 38(113), pages 1-12, January.
  8. Fudenberg, Drew & Maskin, Eric, 1986. "The Folk Theorem in Repeated Games with Discounting or with Incomplete Information," Econometrica, Econometric Society, vol. 54(3), pages 533-54, May.
  9. Nelson, Phillip, 1970. "Information and Consumer Behavior," Journal of Political Economy, University of Chicago Press, vol. 78(2), pages 311-29, March-Apr.
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