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A one-shot Prisoners’ Dilemma with procedural utility

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Abstract

This article introduces a model of rationality that combines procedural utility over actions with consequential utility over payoffs. It applies the model to the Prisoners’ Dilemma and shows that empirically observed cooperative behaviors can be rationally explained by a procedural utility for cooperation. The model characterizes the situations in which cooperation emerges as a Nash equilibrium. When rational individuals are not solely concerned by the consequences of their behavior but also care for the process by which these consequences are obtained, there is no one single rational solution to a Prisoners’ Dilemma. Rational behavior depends on the payoffs at stake and on the procedural utility of individuals. In this manner, this model of procedural utility reflects how ethical considerations, social norms or emotions can transform a game of consequences.

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Paper provided by Department of Economics and Business, Universitat Pompeu Fabra in its series Economics Working Papers with number 819.

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Date of creation: Jun 2003
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Handle: RePEc:upf:upfgen:819

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Web page: http://www.econ.upf.edu/

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Keywords: Prisoner’s Dilemma; Rationality; Procedural Utility; Social Norms; Ethics; Emotions;

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References

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  1. Amartya Sen, 1996. "Maximization and the Act of Choice," Harvard Institute of Economic Research Working Papers 1766, Harvard - Institute of Economic Research.
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  3. Marc Le Menestrel, 2001. "A process approach to the utility for gambling," Economics Working Papers 570, Department of Economics and Business, Universitat Pompeu Fabra.
  4. Kreps, David M. & Milgrom, Paul & Roberts, John & Wilson, Robert, 1982. "Rational cooperation in the finitely repeated prisoners' dilemma," Journal of Economic Theory, Elsevier, vol. 27(2), pages 245-252, August.
  5. Bruno S. Frey & Alois Stutzer, 2005. "Beyond outcomes: measuring procedural utility," Oxford Economic Papers, Oxford University Press, vol. 57(1), pages 90-111, January.
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  14. Marc Le Menestrel & Luk N. Van Wassenhove, 2001. "The domain and interpretation of utility functions: An exploration," Economics Working Papers 576, Department of Economics and Business, Universitat Pompeu Fabra.
  15. Werlang, Sérgio Ribeiro da Costa, 1988. "Common knowledge," Economics Working Papers (Ensaios Economicos da EPGE) 118, FGV/EPGE Escola Brasileira de Economia e Finanças, Getulio Vargas Foundation (Brazil).
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  17. Hammond, P.J. & , ., 1987. "Consequentialist foundations for expected utility," CORE Discussion Papers 1987016, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
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Cited by:
  1. Marc Le Menestrel & Bertrand Lemaire, 2002. "Additive utility with intransitive indifference and without independence: A homogeneous case," Economics Working Papers 628, Department of Economics and Business, Universitat Pompeu Fabra.

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