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Inducing Cooperation by Self-Stipulated Penalties

Author

Listed:
  • Cheng-Zhong Qin

    (Department of Economics, University of California)

Abstract

This paper considers an approach for inducing cooperation in prisoner¡¯s dilemma. The approach is based on players individually committing to pay self-stipulated penalties for defection. We provide a complete characterization of self-stipulated penalties that are necessary and sufficient to induce the players to cooperate in subgame-perfect equilibrium. An alternative interpretation of the conditions using contract remedies is provided.

Suggested Citation

  • Cheng-Zhong Qin, 2008. "Inducing Cooperation by Self-Stipulated Penalties," Annals of Economics and Finance, Society for AEF, vol. 9(2), pages 385-395, November.
    • Handle: RePEc:cuf:journl:y:2008:v:9:i:2:p:385-395
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    File URL: http://www.aeconf.net/Articles/Nov2008/aef090209.pdf
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    References listed on IDEAS

    as
    1. Matthew O. Jackson & Simon Wilkie, 2005. "Endogenous Games and Mechanisms: Side Payments Among Players," Review of Economic Studies, Oxford University Press, vol. 72(2), pages 543-566.
    2. Williamson, Oliver E, 1983. "Credible Commitments: Using Hostages to Support Exchange," American Economic Review, American Economic Association, vol. 73(4), pages 519-540, September.
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    Cited by:

    1. Jianpei Li & Paul Schweinzer, 2013. "Efficiency in strategic form games: A little trust can go a long way," Discussion Papers 13/19, Department of Economics, University of York.

    More about this item

    Keywords

    Penalty for defection; Prisoner¡¯s dilemma; Subgame-perfect equilibrium.;

    JEL classification:

    • C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
    • K12 - Law and Economics - - Basic Areas of Law - - - Contract Law

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