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Dynamic group formation in the repeated prisonerʼs dilemma

  • Maruta, Toshimasa
  • Okada, Akira

We consider dynamic group formation in repeated n-person prisonerʼs dilemma. Agreements in coalitional bargaining are self-binding in that they are supported as subgame perfect equilibria of repeated games. Individuals are allowed to renegotiate the cooperating group agreement through a process of voluntary participation. We prove that a cooperating group forms as an absorbing state of a Markov perfect equilibrium after a finite number of renegotiations if and only if the group is Pareto efficient, provided that individuals are patient. The cooperating group can only expand.

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Article provided by Elsevier in its journal Games and Economic Behavior.

Volume (Year): 74 (2012)
Issue (Month): 1 ()
Pages: 269-284

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Handle: RePEc:eee:gamebe:v:74:y:2012:i:1:p:269-284
Contact details of provider: Web page: http://www.elsevier.com/locate/inca/622836

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