Gradual cooperation in the existence of outside options
The paper shows that efficient cooperation processes exhibit gradualism when each player does not know the likelihood that the other player exercises a stochastically available outside option. Two players, asymmetrically informed on this likelihood, play an infinitely repeated prisoner's dilemma game. Each player is either the high type with the high probability to obtain the outside option or the low type. As time proceeds with neither player exercising the outside option, each player puts more probability on the belief that his partner is the low type, enabling the players to raise cooperation levels in the efficient pooling equilibrium.
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- James Andreoni & Larry Samuelson, 2003.
"Building Rational Cooperation,"
Levine's Working Paper Archive
506439000000000477, David K. Levine.
- Pranab Bardhan, 2004. "Scarcity, Conflicts, and Cooperation: Essays in the Political and Institutional Economics of Development," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262524295, June.
- Watson, Joel, 1999.
"Starting Small and Commitment,"
University of California at San Diego, Economics Working Paper Series
qt37p340fc, Department of Economics, UC San Diego.
- repec:oup:restud:v:67:y:2000:i:2:p:327-58 is not listed on IDEAS
- Olivier Compte & Philippe Jehiel, 2004. "Gradualism in Bargaining and Contribution Games," Review of Economic Studies, Oxford University Press, vol. 71(4), pages 975-1000.
- repec:oup:restud:v:69:y:2002:i:2:p:339-56 is not listed on IDEAS
- Fershtman, C. & Gandal, N., 1991.
37-91, Tel Aviv.
- Matsushina, Hitoshi, 1990. "Long-term partnership in a repeated prisoner's dilemma with random matching," Economics Letters, Elsevier, vol. 34(3), pages 245-248, November.
- Rafael Rob & Huanxing Yang, 2010.
"Long-term relationships as safeguards,"
Springer, vol. 43(2), pages 143-166, May.
- repec:oup:restud:v:58:y:1991:i:2:p:259-76 is not listed on IDEAS
- Petersen, Mitchell A & Rajan, Raghuram G, 1994. " The Benefits of Lending Relationships: Evidence from Small Business Data," Journal of Finance, American Finance Association, vol. 49(1), pages 3-37, March.
- Watson, Joel, 1999. "Starting Small and Renegotiation," Journal of Economic Theory, Elsevier, vol. 85(1), pages 52-90, March.
- Fudenberg, Drew & Maskin, Eric, 1986. "The Folk Theorem in Repeated Games with Discounting or with Incomplete Information," Econometrica, Econometric Society, vol. 54(3), pages 533-54, May.
- repec:oup:restud:v:52:y:1985:i:4:p:557-73 is not listed on IDEAS
- Furusawa, Taiji & Lai, Edwin L. -C., 1999. "Adjustment costs and gradual trade liberalization," Journal of International Economics, Elsevier, vol. 49(2), pages 333-361, December.
- repec:oup:restud:v:63:y:1996:i:3:p:491-519 is not listed on IDEAS
- Kranton, Rachel E, 1996. "The Formation of Cooperative Relationships," Journal of Law, Economics and Organization, Oxford University Press, vol. 12(1), pages 214-33, April.
When requesting a correction, please mention this item's handle: RePEc:eee:jeborg:v:68:y:2008:i:2:p:378-389. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Zhang, Lei)
If references are entirely missing, you can add them using this form.