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Effecting Cooperation

Author

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  • Olivier Compte

    () (Paris School of Economics, Ecole Nationale des Ponts et Chaussées, CERAS)

  • Andrew Postlewaite

    () (Department of Economics, University of Pennsylvania)

Abstract

There is a large repeated games literature illustrating how future interactions provide incentives for cooperation. Much of this literature assumes public monitoring: players always observe precisely the same thing. Even slight deviations from public monitoring to private monitoring that incorporate differences in players’ observations dramatically complicate coordination. Equilibria with private monitoring often seem unrealistically complex. We set out a model in which players accomplish cooperation in an intuitively plausible fashion. Players process information via a mental system — a set of psychological states and a transition function between states depending on observations. Players restrict attention to a relatively small set of simple strategies, and consequently, might learn which perform well.

Suggested Citation

  • Olivier Compte & Andrew Postlewaite, 2007. "Effecting Cooperation," PIER Working Paper Archive 09-019, Penn Institute for Economic Research, Department of Economics, University of Pennsylvania, revised 29 May 2009.
    • Handle: RePEc:pen:papers:09-019
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    References listed on IDEAS

    as
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    Citations

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    Cited by:

    1. Julian Romero, 2011. "Finite Automata in Undiscounted Repeated Games with Private Monitoring," Purdue University Economics Working Papers 1260, Purdue University, Department of Economics.
    2. Daniel Monte & Maher Said, 2014. "The value of (bounded) memory in a changing world," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 56(1), pages 59-82, May.

    More about this item

    Keywords

    Repeated games; private monitoring; bounded rationality; cooperation;

    JEL classification:

    • D01 - Microeconomics - - General - - - Microeconomic Behavior: Underlying Principles
    • D70 - Microeconomics - - Analysis of Collective Decision-Making - - - General

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