The paper shows that being able to forecast another player's actual cooperation better than pure chance can change players' strategic incentives in a one-shot simultaneous PD-situation. In particular, it is shown that if both players have such ability (to forecast each others' actual choices better than pure chance), then "conditionally cooperative" Nash equilibria may exist in addition to the "always defect" equilibrium. By "conditionally cooperative" we mean that players do not cooperate because of a behavioral "disposition" to act cooperatively, but cooperate rather selectively contingent on their forecasting of the opponent's cooperation (cooperate if and only if each other is forecasted to cooperate).
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Paper provided by Universitat des Saarlandes, Center for the Study of Law and Economics in its series Discussion Papers with number
9503.
Find related papers by JEL classification: C70 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - General C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games