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Voluntarily Separable Prisoner's Dilemma with Reference Letters

Author

Listed:
  • Takako Fujiwara-Greve

    (Department of Economics, Keio University)

  • Masahiro Okuno-Fujiwara

    (Faculty of Economics, University of Tokyo)

  • Nobue Suzuki

    (Department of Economics, Komazawa University)

Abstract

We consider voluntarily separable repeated Prisoner's Dilemma in which a pair of players meet randomly and repeatedly play Prisoner's Dilemma only by mutual agreement. Fujiwara-Greve and Okuno-Fujiwara (2007) consider the case that once a partnership is dissolved there is no information flow to other partnerships. We consider the case that players can issue a reference letter to the partner if they entered cooperation periods, but the content of a letter is not verifiable. We show that the sheer existence of a letter shortens the trust-building periods of new matches and thus improves efficiency in equilibrium.

Suggested Citation

  • Takako Fujiwara-Greve & Masahiro Okuno-Fujiwara & Nobue Suzuki, 2008. "Voluntarily Separable Prisoner's Dilemma with Reference Letters," CIRJE F-Series CIRJE-F-551, CIRJE, Faculty of Economics, University of Tokyo.
  • Handle: RePEc:tky:fseres:2008cf551
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    File URL: http://www.cirje.e.u-tokyo.ac.jp/research/dp/2008/2008cf551.pdf
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    References listed on IDEAS

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    1. Carmichael, H Lorne & MacLeod, W Bentley, 1997. "Gift Giving and the Evolution of Cooperation," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 38(3), pages 485-509, August.
    2. Takako Fujiwara-Greve & Masahiro Okuno-Fujiwara, 2009. "Voluntarily Separable Repeated Prisoner's Dilemma," Review of Economic Studies, Oxford University Press, vol. 76(3), pages 993-1021.
    3. Glenn Ellison, 1994. "Cooperation in the Prisoner's Dilemma with Anonymous Random Matching," Review of Economic Studies, Oxford University Press, vol. 61(3), pages 567-588.
    4. Kranton, Rachel E, 1996. "Reciprocal Exchange: A Self-Sustaining System," American Economic Review, American Economic Association, vol. 86(4), pages 830-851, September.
    5. Okuno-Fujiwara, Masahiro & Fujiwara-Greve, Takako & Suzuki, Nobue, 2007. "Social Norms and Voluntary Cooperation," Economic Review, Hitotsubashi University, vol. 58(2), pages 110-121, April.
    6. Michihiro Kandori, 1992. "Social Norms and Community Enforcement," Review of Economic Studies, Oxford University Press, vol. 59(1), pages 63-80.
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