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Voluntarily Separable Prisoner's Dilemma

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  • Takako Fujiwara-Greve

    (Department of Economics, Keio University and Department of Economics, Norwegian School of Management BI)

  • Masahiro Okuno-Fujiwara

    (Faculty of Economics, University of Tokyo)

Abstract

We develop a general framework to analyze endogenous relationships. To consider relationships in the modern society, neither one-shot games nor repeated games are appropriatemodelsbecausethe formationand dissolutionofa relationship is not an option. We formulate voluntarily separable repeated games, in which players are randomly matched t oplay acomponentgameaswellastochoose whether to play the game again with the same partner. There is no information flow across matches, and players are boundedly rational. We extend the notion of Neutrally Stable Distribution (NSD) to fit for our model. When the component game is a prisoner's dilemma, NSD requires some trust-building periods to defect at the beginning of a partnership. We ?nd that polymorphic NSDs with voluntary breakups include strategies with shorter trust-building periods than any monomorphic NSD with no voluntary separation, and hence the average payo? ofpolymorphic NSD is higher.

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Bibliographic Info

Paper provided by CIRJE, Faculty of Economics, University of Tokyo in its series CIRJE F-Series with number CIRJE-F-415.

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Length: 47pages
Date of creation: Apr 2006
Date of revision:
Handle: RePEc:tky:fseres:2006cf415

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  1. Swinkels, Jeroen M., 1992. "Evolutionary stability with equilibrium entrants," Journal of Economic Theory, Elsevier, vol. 57(2), pages 306-332, August.
  2. Kandori, Michihiro, 1992. "Social Norms and Community Enforcement," Review of Economic Studies, Wiley Blackwell, vol. 59(1), pages 63-80, January.
  3. Watson, Joel, 2002. "Starting Small and Commitment," Games and Economic Behavior, Elsevier, vol. 38(1), pages 176-199, January.
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  5. Matsui, Akihiko, 1991. "Cheap-talk and cooperation in a society," Journal of Economic Theory, Elsevier, vol. 54(2), pages 245-258, August.
  6. 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.
  7. 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.
  8. 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.
  9. Rafael Rob & Huanxing Yang, 2006. "Long Term Relationships as Safeguards," Levine's Working Paper Archive 618897000000001039, David K. Levine.
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Cited by:
  1. Akihiko Matsui & In-Koo Cho, 2008. "Matching, Repeated Game and Aspiration," 2008 Meeting Papers 75, Society for Economic Dynamics.

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