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Effecting Cooperation

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Author Info

  • Olivier Compte

    () (Paris School of Economics, Ecole Nationale des Ponts et Chaussées, CERAS)

  • Andrew Postlewaite

    () (Department of Economics, University of Pennsylvania)

Abstract

There is a large repeated games literature illustrating how future interactions provide incentives for cooperation. Much of this literature assumes public monitoring: players always observe precisely the same thing. Even slight deviations from public monitoring to private monitoring that incorporate differences in players’ observations dramatically complicate coordination. Equilibria with private monitoring often seem unrealistically complex. We set out a model in which players accomplish cooperation in an intuitively plausible fashion. Players process information via a mental system — a set of psychological states and a transition function between states depending on observations. Players restrict attention to a relatively small set of simple strategies, and consequently, might learn which perform well.

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Bibliographic Info

Paper provided by Penn Institute for Economic Research, Department of Economics, University of Pennsylvania in its series PIER Working Paper Archive with number 09-019.

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Length: 36 pages
Date of creation: 01 Jul 2007
Date of revision: 29 May 2009
Handle: RePEc:pen:papers:09-019

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Keywords: Repeated games; private monitoring; bounded rationality; cooperation;

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References

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  1. Kyle Bagwell, 1992. "Commitment and Observability in Games," Discussion Papers 1014, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
  2. Kandori, Michihiro, 1992. "Social Norms and Community Enforcement," Review of Economic Studies, Wiley Blackwell, vol. 59(1), pages 63-80, January.
  3. Christopher Phelan & Andrzej Skrzypacz, 2007. "Private Monitoring with Infinite Histories," NajEcon Working Paper Reviews 843644000000000079, www.najecon.org.
  4. George Mailath & Stephen Morris, . ""Repeated Games with Almost-Public Monitoring''," CARESS Working Papres 99-09, University of Pennsylvania Center for Analytic Research and Economics in the Social Sciences.
  5. Kandori, M. & Mailath, G.J., 1991. "Learning, Mutation, And Long Run Equilibria In Games," Papers 71, Princeton, Woodrow Wilson School - John M. Olin Program.
  6. Olivier Compte, 1998. "Communication in Repeated Games with Imperfect Private Monitoring," Econometrica, Econometric Society, vol. 66(3), pages 597-626, May.
  7. Sekiguchi, Tadashi, 1997. "Efficiency in Repeated Prisoner's Dilemma with Private Monitoring," Journal of Economic Theory, Elsevier, vol. 76(2), pages 345-361, October.
  8. Sainty, Barbara, 1999. "Achieving greater cooperation in a noisy prisoner's dilemma: an experimental investigation," Journal of Economic Behavior & Organization, Elsevier, vol. 39(4), pages 421-435, July.
  9. Compte, Olivier, 2002. "On Sustaining Cooperation without Public Observations," Journal of Economic Theory, Elsevier, vol. 102(1), pages 106-150, January.
  10. Miller, John H., 1996. "The coevolution of automata in the repeated Prisoner's Dilemma," Journal of Economic Behavior & Organization, Elsevier, vol. 29(1), pages 87-112, January.
  11. Atila Abdulkadiroglu & Kyle Bagwell, 2005. "Trust, reciprocity and favors in cooperative relationships," Discussion Papers 0405-22, Columbia University, Department of Economics.
  12. Michihiro Kandori & Hitoshi Matsushima, 1998. "Private Observation, Communication and Collusion," Econometrica, Econometric Society, vol. 66(3), pages 627-652, May.
  13. Piccione, Michele, 2002. "The Repeated Prisoner's Dilemma with Imperfect Private Monitoring," Journal of Economic Theory, Elsevier, vol. 102(1), pages 70-83, January.
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Cited by:
  1. Monte, Daniel & Said, Maher, 2010. "Learning in hidden Markov models with bounded memory," MPRA Paper 23854, University Library of Munich, Germany, revised 23 Jun 2010.

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