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Efficiency may Improve when Defectors Exist

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  • Takako Fujiwara-Greve
  • Masahiro Okuno-Fujiwara
  • Nobue Suzuki

Abstract

Voluntarily Separable Repeated Prisoner's Dilemma (Fujiwara-Greve and Okuno-Fujiwara, 2009) has many kinds of equilibria. Focusing on monomorphic and bimorphic equilibria, we show that a bimorphic equilibrium consisting of cooperators and defectors is most efficient, under a mild payoff condition. This is a striking contrast to ordinary repeated Prisoner's Dilemma, where the symmetric efficient payoff is achieved by the symmetric C-trigger equilibrium. Our result indicates that behavioral diversity can be beneficial for the society, when players are free to escape from personalized punishments.

Suggested Citation

  • Takako Fujiwara-Greve & Masahiro Okuno-Fujiwara & Nobue Suzuki, 2013. "Efficiency may Improve when Defectors Exist," Working Papers e060, Tokyo Center for Economic Research.
  • Handle: RePEc:tcr:wpaper:e60
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    References listed on IDEAS

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    1. Takako Fujiwara-Greve & Masahiro Okuno-Fujiwara, 2013. "Diverse Behavior Patterns in a Symmetric Society with Voluntary Partnerships," Working Papers e062, Tokyo Center for Economic Research.

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    JEL classification:

    • C73 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Stochastic and Dynamic Games; Evolutionary Games

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