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Prisoners' Other Dilemma

Author

Listed:
  • Spagnolo, Giancarlo

    (S.S.E., University of Mannheim, and CEPR)

  • Blonski, Matthias

    (Dept. of Economics, University of Mannheim)

Abstract

We find that contrary to common perception, cooperation as equilibrium of the infinitely repeated discounted prisoner's dilemma is in many relevant cases not very plausible, or at least questionable: for a significant subset of the payoff-discount factor parameter space cooperation equilibria are strictly risk dominated by non-cooperation (according to the Harsanyi-Selten 1988 criterion). Examples include collusion equilibria in the repeated Cournot duopoly.

Suggested Citation

  • Spagnolo, Giancarlo & Blonski, Matthias, 2001. "Prisoners' Other Dilemma," SSE/EFI Working Paper Series in Economics and Finance 437, Stockholm School of Economics, revised 04 Aug 2001.
    • Handle: RePEc:hhs:hastef:0437
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    JEL classification:

    • C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games

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