Voluntarily Separable Prisoner's Dilemma with Reference Letters
AbstractWe consider voluntarily separable repeated Prisoner's Dilemma in which a pair of players meet randomly and repeatedly play Prisoner's Dilemma only by mutual agreement. Fujiwara-Greve and Okuno-Fujiwara (2007) consider the case that once a partnership is dissolved there is no information flow to other partnerships. We consider the case that players can issue a reference letter to the partner if they entered cooperation periods, but the content of a letter is not verifiable. We show that the sheer existence of a letter shortens the trust-building periods of new matches and thus improves efficiency in equilibrium.
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Length: 17 pages
Date of creation: Mar 2008
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This paper has been announced in the following NEP Reports:
- NEP-ALL-2008-04-21 (All new papers)
- NEP-CBE-2008-04-21 (Cognitive & Behavioural Economics)
- NEP-EXP-2008-04-21 (Experimental Economics)
- NEP-GTH-2008-04-21 (Game Theory)
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