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In search of an evolutionary edge: trading with a few, more, or many

  • Oded Stark

    ()

  • Doris Behrens

    ()

Consider a population of farmers who live around a lake. Each farmer engages in trade with his m adjacent neighbors, where m is termed the "span of interaction." Trade is governed by a prisoner’s dilemma "rule of engagement." A farmer’s payoff is the sum of the payoffs from the m prisoner’s dilemma games played with his m/2 neighbors to the left, and with his m/2 neighbors to the right. When a farmer dies, his son takes over. The son who adheres to his father’s span of interaction decides whether to cooperate or defect by considering the actions taken and the payoffs received by the most prosperous member of the group comprising his father and his father’s m trading partners. Under a conventional structure of payoffs, it is shown that a large span of interaction is detrimental to the long-run coexistence of cooperation and defection, and conditions are provided under which the social outcome associated with the expansion of trade when individuals trade with a few is better than that when they trade with many. Under the stipulated conditions it is shown, by means of a static comparative analysis of the steady state configurations of the farmer population, that an expansion of the market can be beneficial in one context, detrimental in another.

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File URL: http://hdl.handle.net/10.1007/s00191-010-0182-4
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Article provided by Springer in its journal Journal of Evolutionary Economics.

Volume (Year): 21 (2011)
Issue (Month): 5 (December)
Pages: 721-736

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Handle: RePEc:spr:joevec:v:21:y:2011:i:5:p:721-736
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  1. Tackseung Jun & Rajiv Sethi, 2007. "Neighborhood structure and the evolution of cooperation," Journal of Evolutionary Economics, Springer, vol. 17(5), pages 623-646, October.
  2. Ellison, Glenn, 1993. "Learning, Local Interaction, and Coordination," Econometrica, Econometric Society, vol. 61(5), pages 1047-71, September.
  3. Alós-Ferrer, Carlos & Weidenholzer, Simon, 2008. "Contagion and efficiency," Journal of Economic Theory, Elsevier, vol. 143(1), pages 251-274, November.
  4. Friederike Mengel, 2009. "Conformism and cooperation in a local interaction model," Journal of Evolutionary Economics, Springer, vol. 19(3), pages 397-415, June.
  5. Robert Hoffmann & Nigel Waring, 1996. "The Localisation of Interaction and Learning in the Repeated Prisoner's Dilemma," Working Papers 96-08-064, Santa Fe Institute.
  6. Merrill M. Flood, 1958. "Some Experimental Games," Management Science, INFORMS, vol. 5(1), pages 5-26, October.
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