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Behavioral Theory of Repeated Prisoner’s Dilemma: Generous Tit-For-Tat Strategy (Forthcoming in the B. E. Journal of Theoretical Economics)

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  • Hitoshi Matsushima

    (University of Tokyo)

Abstract

This study investigates infinitely repeated games of a prisoner’s dilemma with additive separability in which the monitoring technology is imperfect and private. Behavioral incentives indicate that a player is not only motivated by pure self-interest but also by social preference such as reciprocity, and that a player often becomes naïve and selects an action randomly due to her cognitive limitation and uncertain psychological mood as well as the strategic complexity caused by monitoring imperfection and private observation. By focusing on generous tit-for-tat strategies, we characterize a behavioral version of Nash equilibrium termed behavioral equilibrium in an accuracy-contingent manner. By eliminating the gap between theory and evidence, we show that not pure self-interest but reciprocity plays a substantial role in motivating a player to make decisions in a sophisticated manner.

Suggested Citation

  • Hitoshi Matsushima, 2019. "Behavioral Theory of Repeated Prisoner’s Dilemma: Generous Tit-For-Tat Strategy (Forthcoming in the B. E. Journal of Theoretical Economics)," CARF F-Series CARF-F-452, Center for Advanced Research in Finance, Faculty of Economics, The University of Tokyo.
    • Handle: RePEc:cfi:fseres:cf452
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    1. Kayaba, Yutaka & Matsushima, Hitoshi & Toyama, Tomohisa, 2020. "Accuracy and retaliation in repeated games with imperfect private monitoring: Experiments," Games and Economic Behavior, Elsevier, vol. 120(C), pages 193-208.
    2. Yutaka Kayaba & Hitoshi Matsushima & Tomohisa Toyama, 2019. "Accuracy and Retaliation in Repeated Games with Imperfect Private Monitoring: Experiments (Revised version of CARF-F-433)," CARF F-Series CARF-F-466, Center for Advanced Research in Finance, Faculty of Economics, The University of Tokyo.

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