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Cooperation Between Emotional Players

Author

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  • Andersson, Lina

    (Department of Economics, School of Business, Economics and Law, Göteborg University)

Abstract

This paper uses the framework of stochastic games to propose a model of emotions in repeated interactions. An emotional player, who transitions between different states of mind as a response to observed actions taken by the other player, can be in either a friendly, a neutral, or a hostile state of mind. The state of mind determines the player's psychological payoff that together with a material payoff constitutes his utility. In the friendly (hostile) state of mind the player has a positive (negative) concern for the other player's material payoffs. Emotions can both facilitate and obstruct cooperation in the repeated prisoners' dilemma game. If finitely repeated, then a traditional player (who cares only for own material payoffs) can have an incentive to manipulate an emotional player into a friendly state of mind for future gains. If infinitely repeated, then two emotional players may require less patience to sustain cooperation. However, emotions can also obstruct cooperation if the players are either unwilling to punisheach other, or become revengeful when punished.

Suggested Citation

  • Andersson, Lina, 2018. "Cooperation Between Emotional Players," Working Papers in Economics 747, University of Gothenburg, Department of Economics.
  • Handle: RePEc:hhs:gunwpe:0747
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    File URL: http://hdl.handle.net/2077/58326
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    More about this item

    Keywords

    Emotions; cooperation; repeated prisoners dilemma; stochastic games;
    All these keywords.

    JEL classification:

    • C73 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Stochastic and Dynamic Games; Evolutionary Games
    • D01 - Microeconomics - - General - - - Microeconomic Behavior: Underlying Principles
    • D91 - Microeconomics - - Micro-Based Behavioral Economics - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making

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